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. 61 |X|
and
s REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 63 |X|
------------------
THE RBB FUND, INC.
-------------------------------------------------------------------------------
(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 .............Shares of Common Stock
The purpose of this Post-Effective Amendment is to update certain information
relating to certain of the Registrant's portfolios.
THE RBB FUND, INC.
(RBB Shares of the Government Securities Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions
7. Purchase of Securities Being Offered............ How to Purchase Shares;
Net Asset Value
8. Redemption or Repurchase........................ How to Redeem Shares;
and Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Bedford Shares of the
Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................ "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Bedford Shares of the
Municipal Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................ "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Bedford Shares of the
Government
Obligations Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................ "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Bedford Shares of the Money Market Portfolio, Municipal Money Market Portfolio and Government Obligations Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................ "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Bedford Shares of the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio,)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Cover Page
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Cash Preservation Shares of the Money Market Portfolio, and Municipal Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Janney Shares of the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio,)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Cover Page
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Cover Page"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Select Shares of the
Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Sansom Street Shares of the Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures; Shareholder
Servicing
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Sansom Street Shares of the Money Market Portfolio, Municipal Money Market Portfolio and Government Obligations Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redempton
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Principal Shares of the
Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Beta Shares of the Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio,)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Inapplicable
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Gamma Shares of the Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio,)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Inapplicable
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Delta Shares of the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio,)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Inapplicable
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Epsilon Shares of the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio,)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Inapplicable
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Zeta Shares of the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio,)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Inapplicable
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Eta Shares of the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio AND NEW YORK Municipal Money Market Portfolio,)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Inapplicable
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Theta Shares of the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio,)
Cross Reference Sheet
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Inapplicable
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ Purchase and Redemption
of Shares-Purchase
Procedures, Net Asset
Value
8. Redemption or Repurchase........................ Purchase and Redemption
................................................ of Shares-Redemption of
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"Purchase and Redemption
of Shares" and
"Distribution of Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(BOSTON PARTNERS INSTITUTIONAL CLASS OF
THE BOSTON PARTNERS LARGE CAP VALUE FUND)
CROSS REFERENCE SHEET
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Not Applicable
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; 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;
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares",
"How to Redeem and
Exchange Shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(BOSTON PARTNERS INVESTOR CLASS OF
THE BOSTON PARTNERS LARGE CAP VALUE FUND)
CROSS REFERENCE SHEET
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Condensed Financial Information ................ Not Applicable
4. General Description of Registrant .............. Cover Page; The Fund;
................................................ Investment Objectives and
Policies
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; 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 Shares;
................................................ Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "The Fund"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares"
and "Distribution of
Fund Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(BOSTON PARTNERS ADVISOR CLASS OF
THE BOSTON PARTNERS LARGE CAP VALUE FUND)
CROSS REFERENCE SHEET
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; Description
of Shares
7. Purchase of Securities Being Offered............ How to Purchase Shares;
Net Asset Value
8. Redemption or Repurchase........................ How to Redeem Shares;
................................................ Net Asset Value
Shares; Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares",
How to Redeem Shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(BOSTON PARTNERS INSTITUTIONAL CLASS OF
THE BOSTON PARTNERS MID CAP VALUE FUND)
CROSS REFERENCE SHEET
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Investment
................................................ Objectives and Policies
Description of Shares
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; 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. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" "Multi
Class Structure: and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares",
"How to Redeem and
Exchange shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(BOSTON PARTNERS INVESTOR CLASS OF
THE BOSTON PARTNERS MID CAP VALUE FUND)
CROSS REFERENCE SHEET
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; The Fund;
................................................ Investment Objectives
and Policies
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; 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 Shares;
................................................ Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "The Fund"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares",
"How to Redeem Shares"
and "Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(BOSTON PARTNERS INSTITUTIONAL CLASS OF
THE BOSTON PARTNERS BOND FUND)
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Introduction;
................................................ Investment Objectives and
Policies; Investment
Limitations; Risk Factors
5. Management of the Fund ......................... Management
5A. Management's Discussion of Fund Performance Not Applicable
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 Shares;
................................................ Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
THE RBB FUND, INC.
(BOSTON PARTNERS INVESTOR CLASS OF
THE BOSTON PARTNERS BOND FUND)
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; Introduction;
................................................ Investment Objectives and
Policies; Investment
Limitations; Risk Factors
5. Management of the Fund ......................... Management
5A. Management's Discussion of Fund Performance Not Applicable
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 Shares; Net
................................................ Asset Value
9. Legal Proceedings............................... Inapplicable
|
THE RBB FUND, INC.
(BOSTON PARTNERS INSTITUTIONAL CLASS AND INVESTOR CLASS
OF THE BOSTON PARTNERS BOND FUND)
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
"Multi-Class Structure"
and "Description of
Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares",
How to Redeem and Exchange
Shares" and "Distribution
of Fund 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
|
THE RBB FUND, INC.
(BOSTON PARTNERS INSTITUTIONAL CLASS OF
THE BOSTON PARTNERS MICRO CAP VALUE FUND)
CROSS REFERENCE SHEET
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Financial Highlights ........................... Financial Highlights
4. General Description of Registrant .............. Cover Page; The Fund;
................................................ Investment Objectives and
Policies
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; 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. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" "Multi
Class Structure: and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"How to Redeem and
Exchange Shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(BOSTON PARTNERS INVESTOR CLASS OF
THE BOSTON PARTNERS MICRO CAP VALUE FUND)
CROSS REFERENCE SHEET
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Condensed Financial Information ................ Not Applicable
4. General Description of Registrant .............. Cover Page; The Fund;
................................................ Investment Objectives and
Policies
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; 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 Shares;
................................................ Net Asset Value
9. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "The Fund"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. Additional Information
................................................ Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" Multi Class
Structure" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"How to Redeem Shares" and
"Distribution of Fund
Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance Information
23. Financial Statements .......................... Financial Statements
PART C ........................................ OTHER INFORMATION
|
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(SCHNEIDER SMALL CAP VALUE FUND)
CROSS REFERENCE SHEET
Form N-1A Item ............................. Location
Part A PROSPECTUS
1. Cover Page ..................................... Cover Page
2. Synopsis ....................................... Introduction
3. Condensed Financial Information ................ Not Applicable
4. General Description of Registrant .............. Cover Page; The Fund;
................................................ Investment Objectives and
Policies
5. Management of the Fund ......................... Management
6. Capital Stock and Other Securities ............. Cover Page; Dividends and
................................................ Distributions; 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. Legal Proceedings............................... Inapplicable
|
PART B ......................................... STATEMENT OF
................................................ ADDITIONAL INFORMATION
10. Cover Page ..................................... Cover Page
11. Table of Contents .............................. Contents
12. General Information and History ................ General; See Prospectus
................................................... "Introduction"
13. Investment Objectives and Policies ............. Investment Objectives
and Policies
14. Management of the Fund ......................... Directors and
................................................ Officers; Investment
Advisory, Distribution
and Servicing Arrangements
15. Control Persons and Principal Holders
of Securities .................................. Miscellaneous
16. Investment Advisory and Other
Services ....................................... Investment Advisory,
................................................ Distribution
and Servicing
Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities ............. RBB Shares; See
................................................ Prospectus-
See Prospectus -
"Dividends and
Distributions" "Multi-
Class Structure" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered ....................... Purchase and Redemption
................................................ Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares",
and "How to Redeem and
Exchange Shares"
20. Tax Status .................................... Taxes; See Prospectus -
.............................................. "Taxes"
21. Underwriters .................................. Portfolio Transactions
22. Calculation of Performance Data ............... Performance and Yield
Information
23. Financial Statements .......................... Not Applicable
|
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 FUND OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY
THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
TABLE OF CONTENTS
INTRODUCTION..........................................
FINANCIAL HIGHLIGHTS..................................
INVESTMENT OBJECTIVES AND POLICIES.................... YEAR 2000............................................. INVESTMENT LIMITATIONS................................
MANAGEMENT............................................ DISTRIBUTION OF SHARES................................ HOW TO PURCHASE SHARES................................ HOW TO REDEEM SHARES..................................
NET ASSET VALUE.......................................
DIVIDENDS AND DISTRIBUTIONS........................... TAXES................................................. DESCRIPTION OF SHARES................................. OTHER INFORMATION..................................... ACCOUNT APPLICATION.............................CENTER
Investment Adviser
BlackRock Institutional Management Corporation
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania
GOVERNMENT SECURITIES
PORTFOLIO
(RBB Class)
PROSPECTUS
December __, 1998
Custodian
PNC Bank, National Association
Philadelphia, Pennsylvania
Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants
THE RBB CLASS
of The RBB Fund, Inc.
This Prospectus offers one class of shares in the Government Securities Portfolio of The RBB Fund, Inc. (the "Fund"). The investment objective of this portfolio is as follows:
Government Securities Portfolio -- to provide the highest level of current income consistent with liquidity and a low risk to principal from a portfolio of U.S. Government obligations. It seeks to achieve such objective by investing in obligations issued or guaranteed by the U.S. Treasury or other agencies or instrumentalities of the U.S. Government.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal.
This Prospectus contains information that a prospective investor needs
to know before investing. Please keep it for future reference. A Statement
of Additional Information, dated December __, 1998, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
Prospectus. It may be obtained free of charge from the Fund by calling
(800) 430-9618. The Prospectus and Statement of Additional Information are
also available for reference, along with other related materials, on the
SEC Internet Web Site (http://www.sec.gov).
PROSPECTUS December __, 1998
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and is currently operating or proposing to operate seventeen separate investment portfolios. The class (the "RBB Class" or the "Class") of shares (the "RBB Shares" or "Shares") offered by this Prospectus represents interests in the Government Securities Portfolio (the "Portfolio").
Fund Management
BlackRock Institutional Management Corporation ("BIMC"), a majority-owned subsidiary of PNC Bank, National Association ("PNC Bank"), serves as the investment adviser to the Portfolio. PNC Bank serves as the custodian to the Fund. PNC Bank and its subsidiaries currently manage over $_____ billion of assets, of which approximately $_____ billion are mutual funds.
PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent to the Fund.
The Distributor
Provident Distributors, Inc. (the "Distributor"), serves as the Fund's distributor.
Investment Portfolio
The investment objective of the Government Securities Portfolio is to provide the highest level of current income consistent with liquidity and a low risk to principal from a portfolio of U.S. Government obligations. It seeks to achieve this objective by investing in obligations issued or guaranteed by the U.S. Treasury or other agencies or instrumentalities of the U.S. Government.
EXPENSE TABLE
The Fee Table below contains a summary of annual operating expenses incurred by the RBB Shares of the Portfolio (after fee waivers and expense reimbursements) for the fiscal year ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases
(as percentage of offering price).................................... 4.75%
Annual Fund Operating Expenses (RBB Class)
(as a percentage of average net assets)
Management Fees (after
waivers)(1).............................................. ___%
12b-1 Fees................................................ ___%
Other Expenses (after
waivers)(1).............................................. ___%
Total Fund Operating Expenses (after
waivers)(1).............................................. %
=====
|
(1) Management Fees and 12b-1 Fees are each based on average daily net assets and are calculated daily and paid monthly. Before expense reimbursements and waivers for the Portfolio, Management Fees would be ___%, Other Expenses would be ___%, and Total Fund Operating Expenses would be ___%.
Example
An investor would pay the following expenses on a $1,000 investment in the Portfolio, assuming (1) a 5% annual return, and (2) redemption at the end of each time period:
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
Government Securities $___* $___* $___* $___*
|
* Reflects the imposition of the maximum sales charge at the beginning of the period.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Long-term shareholders of the Portfolio may pay more than the economic equivalent of the maximum front-end sales charge permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that a holder of RBB Shares in the Portfolio will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management" and "Distribution of Shares" below.) The Fee Table reflects a voluntary waiver of Management Fees for the Portfolio. However, there can be no assurance that any future waivers of Management Fees (if any) will not vary from the figure reflected in the Fee Table. In addition, the investment adviser is currently voluntarily assuming additional expenses of the Portfolio. There can be no assurance that the investment adviser will continue to assume such expenses. Assumption of additional expenses will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors. The expense figures are based on actual costs and fees charged to the Portfolio.
Offering Price
RBB Shares will be offered to the public at the next determined net asset value after receipt by PFPC, the Fund's transfer agent, of an order plus a maximum sales charge of 4.75% of the offering price on single purchases of less than $100,000. The sales charge is reduced on a graduated scale on single purchases of $100,000 or more.
Minimum Initial and Subsequent Investments
The minimum initial investment for RBB Shares is $1,000. Subsequent investments must be $100 or more. See "How to Purchase Shares."
Redemption
Shares may be redeemed at any time at their net asset value next determined after receipt by PFPC of a redemption request. The Fund reserves the right, upon 30 days written notice, to redeem an account consisting of RBB Shares if the net asset value of the investor's Shares in that account falls below $500 and is not increased to at least such amount within such 30-day period. See "How to Redeem Shares--Involuntary Redemption."
Certain Factors to Consider
An investment in the Portfolio is subject to certain risks, as set forth in detail under "Investment Objective and Policies." As with other mutual funds, there can be no assurance that the Portfolio will achieve its objective. The Portfolio, to the extent set forth under "Investment Objective and
Policies," engages in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments, the lending of portfolio securities and engaging in options and futures transactions. All of these transactions involving certain special risks, as set forth under "Investment Objective and Policies." Investment methods described in this Prospectus are among those which the Portfolio has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
Shareholder Inquiries
Any questions or communications regarding a shareholder account should be directed to PFPC, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (800) 430-9618.
The table below sets forth certain information concerning the investment results of the RBB Class of the Government Securities Portfolio for the periods indicated. The financial data included in this table for each of the periods ended August 31, 1994 through August 31, 1998 are part of the Fund's financial statements for the Portfolio, which are incorporated by reference into the Statement of Additional Information and have been audited by PricewaterhouseCoopers LLP, the Fund's independent accountants. The financial data for the Portfolio for the periods ending August 31, 1991, 1992 and 1993 are a part of previous financial statements audited by PricewaterhouseCoopers. Further information about the performance of the Portfolio is available in the Annual Report to Shareholders. The financial data should be read in conjunction with the financial statements and notes thereto. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained free of charge by calling the telephone number on Page 1 of this Prospectus.
Financial Highlights(e)
(For a Share Outstanding Throughout each Period)
For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31, August 31,
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Net asset value, beginning
of period............................... $ 9.04 $ 9.54 $ 9.69 $ 10.73
------- -------- -------- ---------
Income from investment operations:
Net investment income............... 0.8744 0.5220 0.5819 0.5931
Net gains (losses) on securities
(both realized and unrealized)..... 0.1346 (0.2540) 0.0361 (0.8651)
------- ------- ------ -------
Total from investment operations... 1.0090 0.2680 0.6180 (0.2720)
------- ------ ------ -------
Less distributions
Dividends (from net investment
income)............................ (0.8744) (0.5220) (0.5819) (0.5901)
Distributions (from excess of net
investment income)................. -- -- -- (0.0235)
Return of capital .................. (0.3046) (0.2460) (0.1861) (0.1544)
------- ------- ------- -------
Total distributions................ (1.1790) (0.7680) (0.7680) (0.7680)
------- ------- ------- -------
Net asset value, end of period.......... $ 8.87 $ 9.04 $ 9.54 $ 9.69
======= ======= ======= =======
Total return ........................... 9.39%(d) 2.75%(d) 6.72%(d) (2.60%)(d)
Ratios/Supplemental Data
Net assets, end of period (000)....... $6,737 $ 8,785 $10,514 $54,938
Ratios of expenses to average
net assets.......................... 0.70%(a) .70%(a) .72%(a) .64%(a)
Ratios of net investment income to
average net assets ................. 6.18% 6.05% 6.59% 5.86%
Portfolio turnover rate............... 26% 77% 86% 65%
For the Period
August 1, 1991
For the For the (Commencement
Year Ended Year Ended of Operations)
August 31, August 31, to August 31,
1993 1992 1991
---------- ---------- --------------
Net asset value, beginning
of period............................... $ 10.46 $ 10.12 $ 10.00
--------- ---------- ---------
Income from investment operations:
Net investment income............... 0.7080 0.8002 0.0737
Net gains (losses) on securities
(both realized and unrealized)..... 0.3300 0.3408 0.1213
------ ------ ------
Total from investment operations... 1.0380 1.1410 0.1950
------ ------ ------
Less distributions
Dividends (from net investment
income)............................ (0.7080) (0.8010) (0.0750)
Distributions (from excess of net
investment income)................. -- --
Return of capital .................. (0.0600) -- --
------- ------- --------
Total distributions................ (0.7680) (0.8010) (0.0750)
------- ------- -------
Net asset value, end of period.......... $ 10.73 $ 10.46 $ 10.12
======= ======= =======
Total return ........................... 10.36%(d) 11.73%(d) 1.95%(c)(d)
Ratios/Supplemental Data
Net assets, end of period (000)....... $36,296 $25,604 $28,225
Ratios of expenses to average
net assets.......................... .66%(a) .83%(a) 1.10%(a)(b)
Ratios of net investment income to
average net assets ................. 6.70% 7.81% 8.50%(b)
Portfolio turnover rate............... 47% 21% 3%(c)
|
(b) Annualized.
(c) Not annualized.
(d) Sales load not reflected in total return.
(e) Financial Highlights relate solely to the RBB Class of Shares within the portfolio.
Government Securities Portfolio
The objective of the Government Securities Portfolio is to provide the highest level of current income consistent with liquidity and a low risk to principal from a portfolio of U.S. Government obligations. It seeks to achieve such objective by investing in obligations issued or guaranteed by the U.S. Treasury or other agencies or instrumentalities of the U.S. Government. There is no assurance that the investment objective of the Portfolio will be achieved.
U.S. Government Obligations. The Portfolio may purchase U.S. Government agency and instrumentality obligations, which are debt securities issued by U.S. Government-sponsored enterprises and federal agencies. Some obligations of agencies and instrumentalities of the U.S. Government are supported by the full faith and credit of the U.S. Government or by U.S. Treasury guarantees, such as securities of the Government National Mortgage Association and the Federal Housing Authority; others, by the right of the issuer to borrow from the U.S. Treasury, such as securities of the Federal Home Loan Mortgage Corporation and others, only by the credit of the agency or instrumentality issuing the obligation, such as securities of the Federal National Mortgage Association and the Federal Loan Banks. No assurance can be given that the U.S. Government will provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so by law.
During ordinary market conditions, at least 90% of the Portfolio's net assets will be invested in obligations issued or guaranteed by the U.S. Treasury or the agencies or instrumentalities of the U.S. Government, including options and futures on such obligations. The maturities of U.S. Government securities usually range from three months to thirty years. The Portfolio will at all times invest at least 65% of its assets in such obligations, not including options and futures on such obligations. The Portfolio's investment adviser may adjust the average maturity of the Portfolio from time to time depending on its assessment of relative yields of securities of different maturities and its expectations of future changes in interest rates. Thus, at certain times the average maturity of the Portfolio may be relatively short (under one year to five years, for example) and at other times may be relatively long (more than 10 years, for example). The obligations in which the Portfolio invests may not yield as high a level of current income as lower grade obligations.
Hedging Investments. At such times as the Portfolio's investment adviser deems it appropriate and consistent with the investment objective of the Portfolio, the Portfolio may write covered call options on U.S. Government obligations which are traded on a national securities exchange. The Portfolio may also purchase and sell (i) options on U.S. Government obligations, (ii) interest rate futures contracts, and (iii) options on interest rate futures contracts. The purpose of such transactions is to hedge against changes in the market value of securities in the Portfolio caused by fluctuating interest rates, and to close out or offset its existing positions
in such futures contracts or options as described below. Such instruments will not be used for speculation. Options and futures contracts are discussed below.
Options. The Portfolio may purchase options issued by the Options Clearing Corporation on U.S. Treasury bonds, notes and bills. Such options give the Portfolio the right for a fixed period of time to sell (in the case of the purchase of a put option) or to buy (in the case of the purchase of a call option) the number of units of the underlying obligation covered by the option at a fixed or determinable exercise price. Buying a put hedges against the risk of rising interest rates. Buying a call hedges against a market advance when the Portfolio is not fully invested. Prior to its expiration, a put or call option may be sold in a closing sale transaction. Gain or loss from the sale will depend on whether the amount received is more or less than the premium paid for the option plus the related transaction costs.
The Portfolio also may write (sell) put or call options but only if such options are covered, and such options remain covered so long as the Portfolio is obligated as a writer of the option (seller). A call option is "covered" if the Portfolio owns the underlying security covered by the call. A put option is "covered" if the Portfolio maintains in a segregated account with its custodian liquid assets with a value equal to the exercise price. If a "covered" call or put option expires unexercised, the writer realizes a gain in the amount of the premium received. If the covered call is exercised, the writer realizes a gain or loss from the sale or purchase of the underlying security with the proceeds to the writer being increased by the amount of the premium. If the covered put is exercised, the writer's cost of purchasing the underlying security is reduced by the amount of the premium. Prior to its expiration, a put or call option may be purchased in a closing sale transaction and gain or loss from the sale will depend on whether the amount paid is more or less than the premium received for the option plus the related transaction costs.
Options are subject to certain risks, including the risk of imperfect correlation between the option and the Portfolio's other investments and the risk that there might not be a liquid secondary market for the option. In general, options whose strike prices are close to their underlying instruments' current value will have the highest trading volume, while options whose strike prices are further away may be less liquid. The liquidity of options may also be affected if options exchanges impose trading halts, particularly when markets are volatile.
Futures Contracts. As noted above, the Portfolio may invest in financial futures contracts. Financial futures contracts obligate the seller to deliver a specific type of security called for in the contract, at a specified future time, and for a specified price. Financial futures contracts may be satisfied by actual delivery of the securities or, more typically, by entering into an offsetting transaction. There are risks that are associated with the use of futures contracts for hedging purposes. In certain market conditions, as in a rising interest rate environment, sales of futures contracts may not completely offset a decline in value of the portfolio securities against which the futures contracts are being sold. In the futures market, it may not always be possible to execute a buy or sell order at the desired price, or to close out an open position due to market conditions, limits on open positions, and/or daily price fluctuations. Risks in the use of futures contracts also result from the possibility that changes in the market interest rates may differ
substantially from the changes anticipated by the Portfolio's investment adviser when hedge positions were established.
Options on Futures. The Portfolio may purchase and write call and put options on futures contracts which are traded on a U.S. exchange or board of exchange and enter into closing transactions with respect to such options to terminate an existing position. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract. The Portfolio may use options on futures contracts in connection with hedging strategies. The purchase of put options on futures contracts is a means of hedging against the risk of rising interest rates. The purchase of call options on futures contracts is a means of hedging against a market advance when the Portfolio is not fully invested.
There is no assurance that the Portfolio will be able to close out its financial futures positions at any time, in which case it would be required to maintain the margin deposits on the contract. There can be no assurance that hedging transactions will be successful, as there may be imperfect correlations (or no correlations) between movements in the prices of the futures contracts and of the debt securities being hedged, or price distortions due to market conditions in the futures markets. Such imperfect correlations could have an impact on the Portfolio's ability to effectively hedge its securities.
The Portfolio will not enter into financial futures contracts or related options contracts (valued at market value) if, immediately thereafter, more than 50% of the value of the Portfolio's total assets would be so hedged. The 50% investment restriction is not a fundamental policy of the Portfolio and may be changed without a shareholder vote by the Board of Directors. Restrictions imposed by the Internal Revenue Code may also limit the Portfolio's ability to engage in hedging transactions.
The Portfolio intends to comply with the regulations of the Commodity Futures Trading Commission exempting the Portfolio from registration as a "commodity pool operator."
Short Sales. The Portfolio may only make short sales of securities "against-the-box." A short sale is a transaction in which a Portfolio sells a security it does not own in anticipation that the market price of that security will decline. The Portfolio may make short sales as a form of hedging to offset potential declines in long positions in similar securities. In a short sale "against-the-box," at the time of sale, the Portfolio owns or has the immediate and unconditional right to acquire the identical security at no additional cost. When selling short "against-the-box," a portfolio forgoes an opportunity for capital appreciation in the security.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset when the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of
interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
Lending of Portfolio Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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.
Portfolio Turnover. The Portfolio will actively use trading to benefit from yield disparities among different issues of U.S. Government securities or otherwise to achieve its investment objective and policies. The Portfolio, therefore, may be subject to a greater degree of turnover and, thus, a higher incidence of short-term capital gains taxable as ordinary income than might be expected from portfolios which invest substantially all of their funds on a long-term basis, and correspondingly larger mark-up charges can be expected to be borne by the Portfolio. The Portfolio anticipates that the annual turnover in the Portfolio will not be in excess of 200%. A 200% turnover rate is greater than that of many other investment companies.
Illiquid Securities. The Portfolio will not invest more than 15% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objective and Policies--Illiquid Securities" in the Statement of Additional Information.
The Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without the affirmative vote of the holders of a majority of outstanding Shares of the Fund representing interests in the Portfolio.
YEAR 2000.
The services provided to the Portfolio by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Portfolio at that time.
The Portfolio may not change the following investment limitations (with certain exceptions, as noted below) without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objective and Policies.")
The Portfolio may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such limitations.
2. Borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio, or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Portfolio to be invested in the obligations of issuers in any industry, provided that there is no limitation with respect to investments in U.S. Government obligations. (In determining whether the Portfolio has complied with this limitation, the value of options and futures will not be taken into account.)
4. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
Board of Directors
The business and affairs of the Fund and the Portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. The RBB Family Class represents interests in the Government Securities Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for the Portfolio. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $_____ billion of assets, of which approximately $_____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp, Inc. PNC
Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As adviser to the Portfolio, BIMC is responsible for overall management of the Portfolio, and is responsible for all purchases and sales of portfolio securities for the Portfolio.
Robert J. Morgan is responsible for the day-to-day portfolio management of the Portfolio. Mr. Morgan is Assistant Vice President with BIMC, where he has been employed since 1988. Previously, he was a Portfolio Manager with CoreStates Financial Corp.
For the services provided and expenses assumed by it, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .40% of first $250 million of net assets; .35% of next $250 million of net assets; and .30% of net assets in excess of $500 million. BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for the Portfolio. In addition, BIMC may from time to time enter into an agreement with one of its affiliates pursuant to which it delegates some or all of its accounting and administrative obligations under its advisory agreements with the Fund relating to the Portfolio. Any such arrangement would have no effect on the advisory fees payable by the Portfolio to BIMC.
For the fiscal year ended August 31, 1998, BIMC waived all investment advisory fees payable to it with respect to the Portfolio.
Administrator
PFPC serves as administrator to the Portfolio. PFPC is an indirect, wholly-owned subsidiary of PNC Bank Corp. PFPC generally assists the Portfolio in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at an annual rate of .10% of the Portfolio's average daily net assets. For the fiscal year ended August 31, 1998, PFPC waived all administration fees payable to it with respect to the portfolio. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor ("Authorized Dealers") for the provision of certain shareholder support services to customers of such Authorized Dealers who are shareholders of the Portfolio. The services provided and the fees payable by the Fund for these services are
described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania, acts as Distributor for the Portfolio pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of the Portfolio are deducted from its total income before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. The RBB Class of the Fund pays its own distribution fees, and may pay a different share than 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 RBB Class or if it receives different services.
The investment adviser may assume additional expenses of the Portfolio from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolio for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing the Portfolio's expense ratio and of decreasing yield to investors.
For the Fund's fiscal year ended August 31, 1998, the Fund's total expenses were _____% of the average daily net assets of the RBB Class of the Portfolio (not taking into account waivers and reimbursements of _____%).
Portfolio Transactions
The Portfolio's adviser may consider a number of factors in determining which brokers to use in purchasing or selling the Portfolio's securities. These factors, which are more fully discussed in the Statement of Additional Information, include, but are not limited to, research services, the reasonableness of commissions and quality of services and execution. Transactions for the Portfolio may be effected through Authorized Dealers, subject to the requirements of best execution. The Portfolio may enter into brokerage transactions with and pay brokerage commissions to brokers that are affiliated persons (as such term is defined in the 1940 Act) provided that the terms of the brokerage transactions comply with the provisions of the 1940 Act.
THE RBB CLASS NEW ACCOUNT APPLICATION
Mail completed application to:
PFPC - Attention: The RBB Class, P.O. Box 8950, Wilmington, DE 19899
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1 --------------------------------------------------------- [ ] Individual
PLEASE PRINT
Registration
--------------------------------------------------------- [ ] Joint Tenant
Owner
[ ] Custodian
---------------------------------------------------------
Co-owner*, minor, trust
[ ] UGMA_____(state)
---------------------------------------------------------
Street Address [ ] Trust
--------------------------------------------------------- [ ] Corporation
City State Zip Code
[ ] Other____________
---------------------------------------------------------
*For joint registration, both must sign. The registration
will be as joint tenants with the right of survivorship
and not as tenants in common, unless otherwise stated.
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2 Enclosed is my check for $_________ (minimum of $1,000 per portfolio) made payable to
Investments "The RBB Class" Government Securities Portfolio $_________________.
My account being established with this application qualifies for a reduced sales
charge with one of the following privileges:
[ ] Right of Accumulation - I agree for Rights of Accumulation reduced sales charge
based on the following accounts in the RBB Class
------------------------------ --------------------------------
Portfolio Account No.
[ ] Letter of Intent - I agree to the Letter of Intent provisions in the prospectus.
I plan to invest during a 13-month period a dollar amount of at least $________.
($100,000 minimum)
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3 Under penalties of perjury, I certify with my signature below that the number shown
Taxpayer in this section of the application is my correct taxpayer identification number and
Identification that I am not subject to backup withholdings as a result of a failure to report all
interest or dividends, or the Internal Revenue Service has notified me that I am no
longer subject to backup withholding.
If you are subject to backup withholding, check the box in front of the following
statement.
[ ] The Internal Revenue Service has notified me that I am subject to backup withholding.
------------------------------ or -------------------------------- or
(Owner's Social Security #) (Tax Identification #)
------------------------------
(Minor's Social Security #)
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4 A. Dividend Election
Options Unless you elect otherwise, all dividends and capital gains distributions will be
automatically reinvested in additional shares. If you prefer to be paid in cash each
month check the appropriate box below. Pay all:
[ ] dividends and capital gains in cash.
[ ] dividends in cash and reinvest capital gains.
[ ] capital gains in cash and reinvest dividends.
[ ] I request the above distributions be sent to the special payee whose address is
specified in Section B below.
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B. SYSTEMATIC WITHDRAWAL
Systematic withdrawal plan minimum account of $10,000 in shares at the current offering price. Minimum
withdrawal $100. Each withdrawal redemption will be processed about the 25th of the month and mailed
as soon as possible thereafter. Shareholders holding share certificates are not eligible for the
Systematic Withdrawal Plan because share certificates must accompany all withdrawal requests.
Start (month) __________________________________ $(amount)____________________________
[ ] Monthly [ ] Quarterly [ ] Semi-annually [ ] Annually
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Provide the following information only if distribution or withdrawal checks are to be payable to a
person or organization different than as registered.
Name of Bank or Individual: ________________________________________________________
Bank Account # (if applicable)______________________________________________________
Street_______________________________City_________________State________Zip__________
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C. AUTOMATIC INVESTING
This program provides for investments to be made automatically, by authorizing PFPC to withdraw funds
from your bank account. An initial minimum investment of $1,000, and subsequent investment of at least
$100 are required. The program requires additional information so that PFPC may contact your bank to
make sure the arrangement is properly established. This may not be used with a Systematic Withdrawal
Program.
[ ] Check here and the proper form will be sent to you.
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5 Citizenship: [ ] U.S. [ ] Other________________________
Signatures Please provide Phone Number (___)________________
Sign below exactly as printed in Registration.
I(we) am (are) of legal age and have read the prospectus. I(we) hereby certify that
each of the persons listed below has been duly elected, and is now legally holding
the office set below his name and has the authority to make this authorization.
Please print titles below if signing on behalf of a business or trust.
Note: You must cross out item (2) above if you have been notified by the IRS that you
are currently subject to backup withholding because you have failed to report all
interest and dividends on your tax return. The Internal Revenue Service does not
require your consent to any provisions of this document other than the certification
required to audit backup withholding.
-------------------------------------------------------------
Signature
-------------------------------------------------------------
(President, Trustee, General Partner or Agent)
-------------------------------------------------------------
Signature
-------------------------------------------------------------
(Co-owner, Secretary of Corporation, Co-trustee, etc.)
--------------------------------------------------------------------------------------------------------
6 MUST BE COMPLETED BY DEALER
Investment Dealer
-------------------------------------------------------------
Firm Name
-------------------------------------------------------------
Branch Street Address
-------------------------------------------------------------
Representative's Signature
-------------------------------------------------------------
Representative's name (print)
-------------------------------------------------------------
Representative Number
-------------------------------------------------------------
Date
========================================================================================================
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The Board of Directors of the Fund approved and adopted the Distribution Agreement and a Plan of Distribution for the Portfolio (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the Class. The actual amount of such compensation under the Plan is agreed upon by the Fund's Board of Directors and by the Distributor. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plan in the amount of .40% of the average daily net assets of the Class on an annualized basis in any year. Such compensation may be increased, up to the amount permitted in the Plan, with the approval of the Fund's Board of Directors. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission (the "SEC"), the Distributor has agreed to waive its fee with respect to the Class on any day to the extent necessary to ensure that the fee required to be accrued by the Class does not exceed the income of the Class on such day. In addition, the Distributor may, in its discretion, from time to time waive voluntarily all or any portion of its distribution fee.
Under the dealer agreements in effect with respect to the Class, the Distributor may reallocate up to all of the compensation it receives for its services under the Distribution Agreement and the Plan to Authorized Dealers, based upon the aggregate investment amounts maintained by customers of such Authorized Dealers in the Portfolio. The Distributor may also reimburse Authorized Dealers for other expenses incurred in the promotion of the sale of Fund Shares. The Distributor and/or Authorized Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Portfolio as well as for related direct mail, advertising and promotional expenses.
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Fund the fee agreed to under the Distribution Plan. Payments under the Plan are not tied exclusively to expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
General
Shares representing interests in the Portfolio are offered continuously for sale by the Distributor and may be purchased through Authorized Dealers. Shares representing interests in the Portfolio may be purchased initially by completing the application included in this Prospectus and forwarding the application, through the designated Authorized Dealer, to the Fund's transfer agent, PFPC. Subsequent purchases of Shares may be effected through an Authorized Dealer or by mailing a check or Federal Reserve Draft, payable to the order of "The RBB Class" to The RBB Class, c/o PFPC, P.O. Box 8916, Wilmington, Delaware 19899. The name of the Portfolio for which Shares are being purchased must also appear on the check or Federal Reserve Draft. Federal Reserve Drafts are available at national
banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Portfolio must be at least $1,000 and subsequent investments must be at least $100. The Fund reserves the right to reject any purchase order.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and New Year's Day, 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 Saturday or Sunday. Shares are offered at the next determined net asset value per share, plus a sales load as described below.
The price paid for Shares purchased is based on the net asset value next computed (plus a sales charge, if no sales charge has been previously imposed with respect to such Shares) after a purchase order is received in good order by the Fund's transfer agent. Such price will be the net asset value next computed (plus any applicable sales charge) after an order is received by an Authorized Dealer provided such order is transmitted to and received by the Fund's transfer agent prior to its close of business on such day. It is the responsibility of Authorized Dealers to transmit orders received by them to the Fund's transfer agent so they will be received prior to such time. On any Business Day, orders received by the Fund's transfer agent from an Authorized Dealer after its close of business are priced at the net asset value next determined (plus any applicable sales charge) on the following Business Day. Orders of less than $500 are mailed by an Authorized Dealer. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value (plus any applicable sales charge) next determined after the Fund's transfer agent receives the order and Federal Funds are available to the Fund, which is generally two Business Days after a purchase order is received.
Shareholders whose shares are held in the street name account of an Authorized Dealer and who desire to transfer such shares to the street name account of another Authorized Dealer should contact their current Authorized Dealer.
Sales Charges -- General. The following table shows sales charges generally applicable to Shares at various investment levels. Sales charges are reduced on a graduated scale on single purchases of Shares of $100,000 or more. Sales charges are imposed regardless of whether Shares are purchased through Authorized Dealers or by direct investment. During special promotions, as much as the entire sales load may be reallowed to Authorized Dealers, and at such times such Authorized Dealers may, by virtue of such reallowance, be deemed to be "underwriters" under the 1933 Act.
Sales Sales Reallowance
Charge as Charge as to Authorized
Percentage Percentage Dealers (as
of Net of Offering % of Offering
Amount of Transaction at Offering Price Asset Value Price Price)
--------------------------------------- ----------- ----------- -------------
Less than $ 100,000 .......................... 4.99% 4.75% 4.25%
$100,000 but less than $250,000 .............. 4.17 4.00 3.50
$250,000 but less than $500,000 .............. 3.09 3.00 2.50
$500,000 but less than $1,000,000 ............ 2.04 2.00 1.60
$1,000,000 but less than $2,000,000 .......... 1.01 1.00 .80
$2,000,000 but less than $4,000,000 ............ 50 .50 .40
$4,000,000 and above .......................... -0- -0- -0-
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The foregoing schedule of sales charges applies to purchases of Shares made at any one time by the following: (a) any individual; (b) any individual, his or her spouse, and their children under the age of 21; (c) a trustee or fiduciary of a single trust estate or single fiduciary account; or (d) any organized group which has been in existence for more than six months, provided that it is not organized for the purpose of buying redeemable securities of a registered investment company, and provided that the purchase is made through a central administration, or through a single dealer, or by other means which result in economy of sales effort or expense. An organized group does not include a group of individuals whose sole organizational connection is participation as credit card holders of a company, policyholders of an insurance company, customers of either a bank or broker-dealer or clients of an investment adviser. Purchases made by an organized group may include, for example, a trustee or other fiduciary purchasing for a single fiduciary account or other employee benefit plan purchases made through a payroll deduction plan.
The foregoing schedule applies to single purchases and to purchases made under a Letter of Intent or pursuant to the Right of Accumulation, both of which are described below.
Right of Accumulation. Under the Right of Accumulation, the current value of an investor's existing Shares may be combined with the amount of the investor's current purchase of Shares in determining the sales charge. In order to receive the cumulative quantity reduction, previous purchases of Shares must be called to the attention of the Fund's transfer agent at the time of the current purchase.
Letter of Intent. An investor may qualify for a reduced sales charge on a purchase of Shares immediately by signing a nonbinding Letter of Intent stating the investor's intention to invest in Shares during the next 13 months a specified amount which, if made at one time, would qualify for a reduced sales charge. Any redemptions made during the 13-month period will be subtracted from the amount of purchases in determining whether the Letter of Intent has been completed. During the term of a Letter of Intent, the Fund's transfer agent will hold Shares representing 5% of the indicated amount in escrow for payment of a higher sales load if the full amount indicated in the Letter of Intent is not purchased. The escrowed Shares will be released when the full amount indicated has been purchased. If the full amount indicated is not purchased within the 13-month period, the investor will be required to pay an amount equal to the difference in the dollar amount of sales charge actually paid and the
amount of sales charge the investor would have had to pay on his or her aggregate purchases if the total of such purchases had been made at a single time.
The following persons associated with the Fund, the Distributor, or BIMC,
PNC Bank or PFPC may buy Shares without paying a sales charge: (a) officers,
directors and partners; (b) employees and retirees; (c) registered
representatives of Authorized Dealers and of the Distributor; (d) spouses or
children of any such persons; and (e) any trust, pension, profit-sharing or
other benefit plan for any of the persons set forth in (a) through (d) above.
The following persons may also buy Shares without paying a sales charge,
provided any such person informs the Portfolio's transfer agent at the time of
purchase that it believes it qualifies for a sales charge waiver: (a) a trust
department of a bank or law firm; (b) a 501(c)(3) organization and a charitable
remainder trust or a life income pool established for the benefit of a
charitable organization; (c) a registered investment adviser for its own account
or on behalf of its clients; (d) an employee benefit or retirement plan
(including 401(k) plans, 403(b) plans, 457 plans, profit-sharing plans,
SEP-IRAs and qualified plans for self-employed individuals, but excluding
regular IRAs, IRA transfers, IRA rollovers and non-working spousal IRAs): and
(e) a financial planner that charges a fee and makes the qualifying purchases
through a financial institution's net asset value purchase program (provided the
purchase program is recognized by the Fund, and the Portfolio whose shares are
being purchased is listed as part of the purchase program).
Automatic Investing
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account. Investors desiring to participate in the automatic investing program should call the Fund's transfer agent, PFPC, at (800) 430-9618 to obtain the appropriate forms.
Retirement Plans
Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or an Authorized Dealer. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Normal Redemption
Shareholders may redeem for cash some or all of their Shares of the Portfolio at any time. To do so, a written request in proper form must be sent directly to The RBB Class, c/o PFPC, P.O. Box 8916, Wilmington, Delaware 19899. There is no charge for a redemption. Shareholders may also place redemption requests through an Authorized Dealer, but such Authorized Dealer might charge a fee for this service.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. For example, the Fund will issue share certificates for Shares if a written request has been made to the Fund's transfer agent. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Systematic Withdrawal Plan
If your account has a value of at least $10,000, you may establish a Systematic Withdrawal Plan for the Portfolio and receive regular periodic payments. A request to establish a Systematic Withdrawal Plan must be submitted in writing to the Fund's transfer agent, PFPC, P.O. Box 8916, Wilmington, Delaware 19899. Shareholders holding share certificates are not eligible to establish a Systematic Withdrawal Plan because share certificates must accompany all withdrawal requests. Each withdrawal redemption will be processed about the 25th of the month and mailed as soon as possible thereafter. There are no service charges for maintenance; the minimum amount that you may withdraw each period is $100. (This is merely the minimum amount allowed and should not be mistaken for a recommended amount.) The holder of a Systematic Withdrawal Plan will have any income dividends and any capital gains distributions reinvested in full and fractional shares at net asset value. To provide funds for payment, shares of the Portfolio will be redeemed in such amount as is necessary at the redemption price, which is net asset value next determined after the Fund's receipt of a
redemption request. Redemption of shares may reduce or possibly exhaust the Shares in your account, particularly in the event of a market decline. As with other redemptions, a redemption to make a withdrawal payment is a sale for federal income tax purposes. Payments made pursuant to a Systematic Withdrawal Plan cannot be considered as actual yield or income since part of such payments may be a return of capital.
The maintenance of a Systematic Withdrawal Plan for a Class concurrently with purchases of additional Shares would be disadvantageous because of the sales commission involved in the additional purchases. You will ordinarily not be allowed to make additional investments of less than the aggregate annual withdrawals under the Systematic Withdrawal Plan during the time you have the plan in effect and, while a Systematic Withdrawal Plan is in effect, you may not make periodic investments under Automatic Investing. You will receive a confirmation of each transaction showing the sources of the payment and the share and cash balance remaining in your plan. The plan may be terminated on written notice by the shareholder or by the Fund with respect to the Portfolio and it will terminate automatically if all Shares are liquidated or withdrawn from the account or upon the death or incapacity of the shareholder. You may change the amount and schedule of withdrawal payments or suspend such payments by giving written notice to the Fund's transfer agent at least seven Business Days prior to the end of the month preceding a scheduled payment.
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account in the Portfolio at any time the net asset value of the account in such Portfolio falls below $500 as the result of a redemption request. Shareholders will be notified in writing that the value of their account in a Portfolio is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund's transfer agent. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund's transfer agent of the request and any other necessary documents in proper order. Such payment may be postponed or the right of redemption suspended as provided by the rules of the SEC. If the Shares to be redeemed have been recently purchased by check, the Fund's transfer agent may delay mailing a redemption check, which may be a period of up to 15 days, pending a determination that the check has cleared.
The net asset value of each class of the Portfolio is calculated as of the close of regular trading on the NYSE on each Business Day. The net asset value for each class of a portfolio is calculated by adding the value of the proportionate interest of the class in the portfolio'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. The net asset value of each class is calculated separately from each other class.
Valuation of securities held by the Portfolio is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of the Fund'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.
With the approval of the Board of Directors, the Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Portfolio to the Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the Portfolio unless a shareholder elects otherwise.
The Portfolio will declare and pay dividends from net investment income monthly, generally near the end of each month. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
The following discussion is only a brief summary of some of the important tax considerations generally affecting the Portfolio and its shareholders and is not intended as a substitute for careful tax planning. Accordingly, investors in the Portfolio should consult their tax advisers with specific reference to their own tax situation.
The Portfolio will elect to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. So long as the Portfolio 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 constitute "exempt interest dividends" or that are treated as a return of capital) regardless of whether such distributions are paid in cash or reinvested in additional shares.
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 Portfolio, and out of the portion of such net capital gain that constitutes long-term capital gain, will be taxed to shareholders as long-term capital gain, regardless of the length of time a shareholder has held his shares, whether such gain was reflected in the price paid for the shares, or whether such gain was attributable to bonds bearing tax-exempt interest. 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% while the maximum rate imposed on long-term capital gain of such taxpayers is 20%. Corporate taxpayers are taxed at the same rates on both ordinary income and capital gains.
The Fund will send written notices to shareholders annually regarding the tax status of distributions made by the Portfolio. Dividends declared in October, November or December of any year payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders on December 31, provided such dividends are paid during January of the following year. The Portfolio intends to make sufficient actual or deemed distributions prior to the end of each calendar year to avoid liability for federal excise tax.
Investors should be careful to consider the tax implications of buying shares just prior to a distribution. The price of shares purchased at that time will reflect the amount of the forthcoming distribution. Those investors purchasing just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received.
Shareholders who exchange shares representing interests in one portfolio for shares representing interests in another portfolio will generally recognize capital gain or loss for federal income tax purposes. Under certain provisions of the Code, some shareholders may be subject to a 31% "backup" withholding tax on reportable dividends, capital gains distributions and redemption payments.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. federal income tax treatment.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ________ billion shares are currently classified into _________ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
Shares of a class of Common Stock in the Cash Preservation Family may be exchanged for another class of Common Stock in such Family as well as for shares of the RBB Class. Otherwise, no exchanges between Families or classes are permitted.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE GOVERNMENT SECURITIES PORTFOLIO OF THE RBB CLASS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THIS PORTFOLIO.
Each share that represents an interest in the Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of the Portfolio will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________ 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC, the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (800) 430-9618.
Performance Information
From time to time, the Portfolio 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, net of the Portfolio's maximum sales charge, over one, five and ten year periods or, if such periods have not yet elapsed, shorter periods corresponding to the life of the Portfolio. Such total return quotations will be computed by finding the compounded average annual total return for each time period that would equate the assumed initial investment, of $1,000 to the ending redeemable value, net of the maximum sales charge and other fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The Portfolio 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 Portfolio's performance with other measures of investment return. For example, the Portfolio's total return may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average. For these purposes, the performance of a portfolio, as well as the performance published by such services or experienced by such indices, will usually not reflect sales charges, the inclusion of which would reduce performance results. 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. If the Portfolio advertises non-standard computations, however, the Portfolio will 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.
From time to time, the Portfolio may also advertise its "30-day yield." The yield of the Portfolio refers to the income generated by an investment in the Portfolio over the
30-day period identified in the advertisement, and is computed by dividing the net investment income per share earned by the Portfolio during the period by the maximum public offering price per share of the last day of the period. This income is "annualized" by assuming that the amount of income is generated each month over a one-year period and is compounded semi-annually. The annualized income is then shown as a percentage of the net asset value.
The yield on Shares of the Portfolio will fluctuate and is not necessarily representative of future results. Shareholders should remember that yield is generally a function of portfolio quality and maturity, type of instrument, operating expenses and market conditions. Any fees charged by broker/dealers directly to their customers in connection with investments in the Portfolio are not reflected in the yields on the Portfolio's Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The yield on Shares of the RBB Class may differ from yields on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
MONEY MARKET
PORTFOLIO
PROSPECTUS & APPLICATION
DECEMBER __, 1998
BEAR
STEARNS
MONEY MARKET PORTFOLIO
OF
THE RBB FUND, INC.
THE BEDFORD SHARES OF THE MONEY MARKET PORTFOLIO are a class of shares of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company. Shares of the Bedford Class offered by this Prospectus represent interests in the Fund's Money Market Portfolio.
o The investment objective of the Money Market Portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
BlackRock Institutional Management Corporation serves as investment adviser for the Portfolio, PNC Bank, National Association serves as custodian for the Fund and PFPC Inc. serves as the administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference into this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the SEC Internet Website (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
TABLE OF CONTENTS
PAGE
INTRODUCTION..............................................................
FEE TABLE.................................................................
FINANCIAL HIGHLIGHTS......................................................
INVESTMENT OBJECTIVE AND POLICIES......................................... YEAR 2000................................................................. INVESTMENT LIMITATIONS.................................................... PURCHASE, REDEMPTION AND EXCHANGE OF SHARES...............................
NET ASSET VALUE...........................................................
MANAGEMENT................................................................ DISTRIBUTION OF SHARES....................................................
DIVIDENDS AND DISTRIBUTIONS...............................................
TAXES
DESCRIPTION OF SHARES.....................................................
OTHER INFORMATION.........................................................
The RBB Fund, Inc. (the "Fund") is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares ("Shares") of the Bedford Class (the "Bedford Class" or the "Class") of common stock of the Fund offered by this Prospectus represent interests in the Fund's Money Market Portfolio (the "Money Market Portfolio" or the "Portfolio").
The MONEY MARKET PORTFOLIO'S investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Portfolio seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolio will be able to maintain a stable net asset value of $1.00 per share.
The Portfolio's investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund and PFPC Inc. ("PFPC" or the "Administrator" or "Transfer Agent") serves as administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. ("PDI" or the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of the Class through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in the Shares is subject to certain risks, as set forth in detail under "Investment Objective and Policies." The Portfolio, to the extent set forth under "Investment Objective and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of asset-backed securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objective and Policies."
FEE TABLE
The Fee Table below contains a summary of the annual operating expenses incurred by the Bedford Class of the Portfolio after fee waivers and expense reimbursements for the fiscal year ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
ANNUAL FUND OPERATING EXPENSES (BEDFORD CLASS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
MONEY MARKET
PORTFOLIO
Management Fees (after waivers)(1)..................................... __%
12b-1 Fees(1).......................................................... __%
Other Expenses......................................................... __%
Total Operating Expenses (Bedford Class)
(after waivers)(1)................................................... %
=====
------------
(1) Management Fees and 12b-1 Fees are based on average daily net assets
|
and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Management Fees would be ___% and Total Fund Operating Expenses would be ____%.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
MONEY MARKET
PORTFOLIO*
1 Year........................................................ $ 3 Years....................................................... $ 5 Years....................................................... $ 10 Years...................................................... $
*Other classes of this Portfolio are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Bedford Class of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management -- Investment Adviser" and "Distribution of Shares" below.) The expense figures are based on actual costs and fees charged to the Class. The Fee Table reflects expense reimbursements and a voluntary waiver of
Management Fees for the Class. However, there can be no assurance that any future expense reimbursements and waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolio, such assumption will have the effect of lowering such Portfolio's overall expense ratio and increasing its yield to investors.
From time to time the Portfolio advertises its "total return", "yield" and "effective yield." TOTAL RETURN AND BOTH YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of the Portfolio refers to the income generated by an investment in the Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in Shares are not reflected in the total return and yields of the Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Class may differ from the total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each class of the Portfolio.
The table below sets forth certain information concerning the investment results of the Bedford Class of the Fund representing interests in the Money Market Portfolio for the years indicated. The financial data included in this table for each of the periods ended August 31, 1994 through 1998 are a part of the Fund's financial statements for the Portfolio, which are incorporated by reference into the Statement of Additional Information and have been audited by _________________________________________________________ the Fund's independent accountants. The financial data for the periods ended August 31, 1989, 1990, 1991, 1992 and 1993 are a part of previous financial statements audited by _____________________. 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 Portfolio is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on Page 1 of the Prospectus.
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1998 1997 1996 1995
--------------------------------------------------------------------------------
Net asset value
beginning of period $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Income from investment
operations:
Net investment 0.0462 0.0469 0.0486
income................
Net gains on
securities
(both realized
and unrealized..... --- --- ---
------- -------- --------
Total from investment
operations......... 0.0462 0.0469 0.0486
------- -------- --------
Less distributions
Dividends (from net
investment income). (0.0462) (0.0469) (0.0486)
Distributions (from
capital gains)..... -- --- ---
------- -------- --------
|
-------------------------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE FOR THE SEPTEMBER 30, 1988
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, OPERATIONS) TO
1994 1993 1992 1991 1990 AUGUST 31, 1989
-------------------------------------------------------------------------------------------------------
Net asset value
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income................ 0.0278 0.0243 0.0375 0.0629 0.0765 0.0779
Net gains on
securities
(both realized
and unrealized..... --- --- 0.0007 --- --- ---
-------- -------- -------- -------- ------- -------
Total from investment
operations......... 0.0278 0.0243 0.0382 0.0629 0.0765 0.0779
-------- -------- -------- -------- -------- --------
Less distributions
Dividends (from net
investment income). (0.0278) (0.0243) (0.0375) (0.0629) (0.0765) (0.0779)
Distributions (from
capital gains)..... --- --- (0.0007) --- --- ---
-------- -------- -------- -------- -------- --------
|
Total distributions (0.0462) (0.469) (0.0486)
--------- -------- --------
Net asset value, end
of period.................. $ 1.00 $ 1.00 $ 1.00
======== ======== ========
Total return............... 4.72% 4.79% 4.97%
Ratios/Supplemental
Data
Net assets,
end of period (000) $1,392,911 $1,109,334 $935,821
Ratios of expenses to
average net assets .97%(a) .97%(a) .96%(a)
Ratios of net investment
income to average
net assets............ 4.62% 4.69% 4.86%
|
Total distributions (0.0278) (0.0243) (0.0382) (0.0629) (0.0765) (0.0779)
-------- -------- -------- -------- -------- --------
Net asset value, end
of period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return............... 2.81% 2.46% 3.89% 6.48% 7.92% 8.81%(b)
Ratios/Supplemental
Data
Net assets,
end of period (000) $710,737 $782,153 $736,842 $747,530 $709,757 $152,311
Ratios of expenses to
average net assets .95%(a) .95%(a) .95%(a) .92%(a) .92%(a) .93%(a)(b)
Ratios of net investment
income to average
net assets............ 2.78% 2.43% 3.75% 6.29% 7.65% 8.61%(b)
|
INVESTMENT OBJECTIVE AND POLICIES
MONEY MARKET PORTFOLIO
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." There is no assurance that the investment objective of the Money Market Portfolio will be achieved. The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests.
BANK OBLIGATIONS.
The Portfolio may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
COMMERCIAL PAPER.
The Portfolio may purchase commercial paper (i) rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organizations") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such rating. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a
Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
VARIABLE RATE DEMAND NOTES.
The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
REPURCHASE AGREEMENTS.
The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. GOVERNMENT OBLIGATIONS.
The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
ASSET-BACKED SECURITIES.
The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not
expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
REVERSE REPURCHASE AGREEMENTS.
The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 ("1940 Act").
MUNICIPAL OBLIGATIONS.
In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see Statement of Additional Information under "Investment Objectives and Policies."
GUARANTEED INVESTMENT CONTRACTS.
The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investments in illiquid securities.
STAND-BY COMMITMENTS.
The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
WHEN-ISSUED SECURITIES.
The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
ELIGIBLE SECURITIES.
The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two highest rating categories by at least two Rating Organizations ("Rating Organizations") (e.g. commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES.
The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
The services provided to the fund by bimc and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the Year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the Year 2000 could have a negative impact on BIMC'S provision of investment advisory services, including the handling of securities trades pricing. both BIMC and PFPC have advised the fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the Year 2000 and expect that given the extensive testing which they are undertaking , their systems will be Year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving Year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the fund at that time.
The Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the investment limitations summarized below without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
THE MONEY MARKET PORTFOLIO MAY NOT:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings in excess of 5% of the Portfolio's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in
obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
4. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such 5% limitation.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three Business Days, (as defined below). "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization, are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short- term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
THE BEAR STEARNS FUNDS
ACCOUNT INFORMATION FORM
Please Note: Do not use this form to open a retirement plan account. For retirement plan forms call 1-800-766-4111. For assistance in completing this form, contact PFPC at 1-800-447-1139.
1. ACCOUNT TYPE (Please print; indicate only one registration type)
[__] INDIVIDUAL [__] JOINT TENANT
(1) Use only the Social Security number or Taxpayer Identification Number of the first listed joint tenant.
(2) For joint registrations, the account registrants will be joint tenants with right of survivorship and not tenants in common unless tenants in common or community property registrations are requested.
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[__] UNIFORM GIFT TO MINORS, OR [__] UNIFORM TRANSFER TO MINORS
(WHERE ALLOWED BY LAW)
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NAME OF ADULT CUSTODIAN (ONLY ONE PERMITTED)
Under the ________________________ Uniform Gift/Transfers to Minors Act
STATE RESIDENCE OF MINOR
------/------/------ --------------------------
MINOR'S DATE OF BIRTH MINOR'S SOCIAL SECURITY NUMBER
(REQUIRED TO OPEN ACCOUNT)
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[__] Corporation [__] Partnership [__] Trust* [__] Other
NAME OF CORPORATION, PARTNERSHIP, OR OTHER
----------------------------------------------------------------------- NAME(S) OF TRUSTEE(S) DATE OF THE TRUST AGREEMENT -------------------------- ------------------------------ SOCIAL SECURITY NUMBER TAXPAYER IDENTIFICATION NUMBER (REQUIRED TO OPEN ACCOUNT) (REQUIRED TO OPEN ACCOUNT) |
*If a Trust, include date of trust instrument and list of trustees if they are to be named in the registration.
2. MAILING ADDRESS
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STREET OR P.O. BOX APARTMENT NUMBER
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CITY STATE ZIP CODE
( ) ( )
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DAY TELEPHONE EVENING TELEPHONE
3. INVESTMENT INFORMATION
METHOD OF INVESTMENT
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[__] I have enclosed a check for a minimum initial investment of
$1,000 per Fund.
[__] I have enclosed a check for a minimum subsequent investment of
$250 per Fund or completed the Systematic Investment Plan
information in Section 13.
[__] I purchased _____________ shares of __________________________
through my broker on __/__/__. Conform #___________.
PLEASE MAKE MY INVESTMENT IN THE FUNDS DESIGNATED BELOW:
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CLASS A CLASS C CLASS Y BEAR STEARNS FUNDS INVESTMENT AMOUNT
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_______ _______ _______ S&P STARS Portfolio $________________
_______ _______ _______ Large Cap Value Portfolio $________________
_______ _______ _______ Small Cap Value Portfolio $________________
_______ _______ _______ Total Return Bond Portfolio $________________
_______ _______ _______ The Insiders Select Fund $________________
_______ _______ _______ Emerging Markets Debt Portfolio $________________
_______ _______ _______ Money Market Portfolio $________________
TOTAL INVESTMENT AMOUNT $================
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Note: All shares purchased will be held in a shareholder account for the investor at the Transfer Agent. Checks drawn on foreign banks and checks made payable to persons or entities other than the Fund will not be accepted. Checks should be made payable to the Fund which you are investing in. If no class is designated, your investment will be made in Class A shares.
4. REDUCED SALES CHARGE (AVAILABLE FOR CLASS A SHARES ONLY)
Method of Investment
Are you a shareholder in another Bear Stearns Fund? [__] Yes [__] No
[__] I apply for Right of Accumulation reduced sales charges based on the following Bear Stearns Fund Accounts (excluding Class C Shares).
----------------------------------------------------------------------- FUND ACCOUNT NUMBER OR SOCIAL SECURITY NUMBER ----------------------------------------------------------------------- FUND ACCOUNT NUMBER OR SOCIAL SECURITY NUMBER ----------------------------------------------------------------------- FUND ACCOUNT NUMBER OR SOCIAL SECURITY NUMBER LETTER OF INTENT |
[__] I am already investing under an existing Letter of Intent.
[__] I agree to the Letter of Intent provisions in the Fund's current
prospectus. During a 13-month period, I plan to invest a dollar
amount of at least:
[__] $50,000 [__] $100,000 [__] $250,000
[__] $500,000 [__] $750,000 [__] $1,000,000
NET ASSET VALUE PURCHASE
[__] I qualify for an exemption from the sales charge by meeting the conditions set forth in the prospectus. (Please attach certification to this form.)
[__] I qualify to purchase shares at net asset value, with proceeds received from a mutual fund or closed-end fund not distributed by Bear Stearns. (Please attach proof of fund share redemption.)
5. DISTRIBUTION OPTIONS
DIVIDENDS AND CAPITAL GAINS MAY BE REINVESTED OR PAID BY CHECK. IF NO OPTIONS ARE SELECTED BELOW, BOTH DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED IN ADDITIONAL FUND SHARES.
Dividends [__] Pay by check. [__] Reinvest. Capital Gains [__] Pay by check. [__] Reinvest.
The Redirected Distribution Option allows an investor to have dividends and any other distributions from a Fund automatically used to purchase shares of the same class of any other Fund. The receiving account must be in the same name as your existing account.
[__] Please reinvest dividends and capital gains from the _____________________ to the _______________________.
(NAME OF FUND) (NAME OF FUND)
If you elect to have distributions paid by check, distributions will be sent to the address of record. Distributions may also be sent to another payee:
NAME
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STREET OR P.O. BOX APARTMENT NUMBER
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CITY STATE ZIP CODE
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OPTIONAL FEATURES
6. AUTOMATIC WITHDRAWAL PLAN
[__] Fund Name _________________________ [__] Amount ______________
[__] Startup month _____________________
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Frequency option:
[__] Monthly [__] Every other month [__] Quarterly [__] Semiannually
[__] Annually
o A minimum account value of $5,000 in a single account is required to establish an automatic withdrawal plan.
o Payments will be made on or near the 25th of the month.
o Shareholders holding share certificates are not eligible for the Automatic Withdrawal Plan.
[__] Please mail checks to Address of Record (Named in Section 2)
[__] Please electronically credit my Bank of Record
(Named in Section 9)
[__] Special payee as specified below:
NAME
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STREET OR P.O. BOX APARTMENT NUMBER
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CITY STATE ZIP CODE
7. TELEPHONE EXCHANGE PRIVILEGE
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Unless indicated below, I authorize the Transfer Agent to accept instructions from any persons to exchange shares in my account(s) by telephone, in accordance with the procedures and conditions set forth in the Fund's current prospectus.
[__] I DO NOT want the Telephone Exchange Privilege.
8. TELEPHONE REDEMPTION PRIVILEGE
[__] I authorize the Transfer Agent to accept instructions from any person to redeem shares in my account(s) by telephone, in accordance with the procedures and conditions set forth in the Fund's current prospectus.
Checks for redemption of proceeds will be sent by check via U.S. Mail to the address to record, unless the information in Section 9 is completed for redemption by wire of $500 or more.
9. BANK OF RECORD (FOR TELEPHONE REDEMPTIONS AND/OR SYSTEMATIC INVESTMENT PLANS) PLEASE ATTACH A VOIDED CHECK (FOR ELECTRONIC CREDIT TO YOUR CHECKING ACCOUNT) IN THE SPACE PROVIDED IN SECTION 13.
BANK NAME
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STREET OR P.O. BOX APARTMENT NUMBER
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CITY STATE ZIP CODE
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BANK ABA NUMBER BANK ACCOUNT NUMBER
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ACCOUNT NAME
10. SIGNATURE AND TAXPAYER CERTIFICATION
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The undersigned warrants that I(we) have full authority and, if a natural person, I(we) am(are) of legal age to purchase shares pursuant to this Account Information Form, and have received a current prospectus for the Bear Stearns Fund(s) in which I(we) am(are) investing. THE UNDERSIGNED ACKNOWLEDGES THAT THE TELEPHONE EXCHANGE PRIVILEGE IS AUTOMATIC AND THAT I(WE) MAY BEAR THE RISK OF LOSS IN EVENT OF FRAUDULENT USE OF THE PRIVILEGE. If I(we) do not want the Telephone Exchange Privilege, I(we) have so indicated on this Account Information Form.
Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is required to have the following certification:
Under penalty of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding or (b) I have not been notified by the Internal Revenue Service that I am subject to 31% backup withholding as a result of a failure to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding.
Certification Instructions - You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting of interest or dividends on your tax return. MUTUAL FUND SHARES ARE NOT DEPOSITS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION, NOR ARE THEY INSURED BY THE FDIC. INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
[__] Exempt from backup withholding
[__] Nonresident alien (Form W-8 attached) ___________________________
COUNTRY OF CITIZENSHIP
11. FOR AUTHORIZED DEALER USE ONLY (Please Print)
We hereby authorize the Transfer Agent to act as our agent in connection with the transactions authorized by the Account Information Form and agree to notify the Transfer Agent of any purchases made under a Letter of Intent or Right of Accumulation. If this Account Information Form includes a Telephone Exchange Privilege authorization, a Telephone Redemption Privilege authorization or an Automatic Withdrawal Plan request, we guarantee the signature(s) above.
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DEALER'S NAME DEALER NUMBER
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MAIN OFFICE ADDRESS BRANCH NUMBER
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REPRESENTATIVE'S NAME REP. NUMBER
( )
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BRANCH ADDRESS TELEPHONE NUMBER
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AUTHORIZED SIGNATURE OF DEALER TITLE DATE
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12. ADDITIONAL ACCOUNT STATEMENTS (Please Print)
In addition to myself and my representative, please send copies of my account statements to:
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NAME NAME
-----------------------------------------------------------------------
ADDRESS ADDRESS
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CITY, STATE, ZIP CODE CITY, STATE, ZIP CODE
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13. SYSTEMATIC INVESTMENT PLAN |
The Systematic Investment Plan, which is available to shareholders of the Bear Stearns Funds, makes possible regularly scheduled purchases of Fund shares to allow dollar-cost averaging. The Funds' Transfer Agent can arrange for an amount of money selected by you ($100 minimum) to be deducted from your checking account and used to purchase shares of a specified Bear Stearns Fund. A $250 minimum initial investment is required. This may not be used in conjunction with the Automatic Withdrawal Plan.
Please debit $__________ from my checking account (named in Section 9) on or about the 20th of the month. Depending on the Application receipt date, the Plan may take 10 to 20 days to be in effect.
[__] Monthly [__] Every alternate month
[__] Quarterly [__] Other _______________
$____________ into the _______________ Fund ______________ Start Month.
$100 MINIMUM
$____________ into the _______________ Fund ______________ Start Month.
$100 MINIMUM
$____________ into the _______________ Fund ______________ Start Month.
$100 MINIMUM
If you are applying for the Telephone Redemption Privilege or Systematic Investment Plan, please tape your voided check on top of our sample below.
[TAPE CHECK HERE]
SERVICE ASSISTANCE MAILING INSTRUCTIONS
Our knowledgeable Client Services Mail your completed Account
Representatives are available to Information Form and check to:
assist you between 8:30 a.m. and THE BEAR STEARNS FUNDS
5:00 p.m. Eastern Time at: C/O PFPC INC.
1-800-447-1139 P.O. BOX 8960
WILMINGTON, DE 19899-896
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PURCHASE PROCEDURES
GENERAL. Bedford Shares are sold without a sales load on a continuous basis by the Fund's Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Bedford Shares either directly, through an exchange from accounts invested in shares of any open-end investment company ("The Bear Stearns Funds") either sponsored by or advised by Bear, Stearns & Co. Inc. ("Bear Stearns"), or its affiliates, or through an account (the "Account") maintained by the investor with certain brokerage firms and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $250. The Fund in its sole discretion may accept or reject any order for purchases of Bedford Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. Orders which are accompanied by Federal Funds, and received by the Fund by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
If a broker makes special arrangements under which orders for Bedford Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made in Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
PURCHASES THROUGH AN ACCOUNT. Purchases of Shares may be effected through brokers (other than Bears Stearns or brokers who have clearing arrangements with Bear Stearns) and may be made by check (except that a check drawn on a foreign bank will not be accepted), Federal Reserve draft or by wiring Federal Funds with funds held in the brokerage accounts. Checks or Federal Reserve drafts
should be made payable as follows: (1) to an investor's broker or (ii) to "The
RBB Fund-Money Market Portfolio (Bedford Class)" if purchased directly from the
Portfolio, and should be directed to the Transfer Agent: PFPC Inc., Attention:
The RBB Fund-Money Market Portfolio (Bedford Class), P.O. Box 8960, Wilmington,
Delaware 19899. The investor's broker is responsible for forwarding payment
promptly to the Fund's custodian, PNC Bank. An investor's bank or broker may
impose a charge for this service.
In the event of a purchase effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker, beneficial ownership of Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investor Account requirements. Even if a broker does not impose a sales charge for purchases of Bedford Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker. Shareholders whose shares are held in the street name account of a broker/dealer and who desire to transfer such shares to the street name account of another broker/dealer should contact their current broker/dealer.
A Shareholder of The Bear Stearns Funds may purchase Bedford Shares of the Portfolio in exchange for his shares of The Bear Stearns Funds. This exchange privilege is available for an investor with an existing account. See "Exchange of Shares" below.
For distribution services with respect to Bedford Shares of the Portfolio held by clients of Bear Stearns, the Fund's Distributor will pay Bear Stearns up to .50% of the annual average value of such accounts.
DIRECT PURCHASES. Investors may purchase the Portfolio's shares by mail by completing and signing an Account Information Form (the "Application"), a copy of which is attached to this Prospectus, and mailing it, together with a check payable to "The RBB Fund--Money Market Portfolio (Bedford Class)," to Bedford Money Market Portfolio, c/o PFPC, P.O. Box 8960, Wilmington, Delaware 19899. The check must specify the name of The RBB Fund -- Money Market Portfolio (Bedford Class). Subsequent purchases may be made by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares by having his bank or his broker wire Federal Funds to the Fund's custodian, PNC Bank. An investor's bank or broker may impose a charge for this service. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 447-1139 and provide your name, address, telephone number, Social Security or Tax Identification Number, the Bedford Class selected, the amount being
wired, and by which bank. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify the Fund's transfer agent prior to wiring funds.)
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to the custodian:
PNC Bank, N.A.
ABA-0310-0005-3.
CREDIT ACCOUNT NUMBER: 86-1030-3398
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number
with the Portfolio)
FOR PURCHASE OF: (name of the Portfolio)
AMOUNT: (amount to be invested)
C. Complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
RETIREMENT PLANS. Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
REDEMPTION PROCEDURES
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
REDEMPTION OF SHARES IN AN ACCOUNT. An investor who beneficially owns Shares in an Account may redeem Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC from the broker by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
REDEMPTION OF SHARES OWNED DIRECTLY. An investor may redeem any number of Shares by sending a written request to The RBB Fund Money Market Portfolio (Bedford Class), c/o PFPC, P.O. Box 8960, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, a signature guarantee is required. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Investors may redeem or exchange shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by calling (888) 261-4073. Neither the Fund, the Portfolio, the Distributor, PFPC nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following measures: (1)
requiring the appropriate telephone transaction privilege forms; (2) requiring
the caller to provide the names of the account owners, the account social
security number and name of the Portfolio, all of which must match the Fund's
records; (3) requiring the Fund's service representative to complete a telephone
transaction form, listing all of the above caller identification information;
(4) requiring that redemption proceeds be sent only by check to the account
owners of record at the address of record, or by wire only to the owners of
record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers or other
industry professionals, additional documentation or information regarding the
scope of a caller's authority is required. Finally, for telephone transactions
in accounts held jointly, additional information regarding other account holders
is required. Telephone transactions will not be permitted in connection with IRA
or other retirement plan accounts or by an attorney-in-fact under power of
attorney.
Redemption proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization Form that such proceeds are to be sent by wire transfer to a specified checking or savings account. If redemption proceeds are to be sent by wire transfer, a telephone redemption request received prior to the
close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
REDEMPTION BY CHECK. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $250; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
Written redemption instructions, indicating the Portfolio from which shares are to be redeemed, and duly endorsed stock certificates, if previously issued, must be received by the transfer agent in proper form and signed exactly as the shares are registered. All signatures must be guaranteed as described above under "Redemption of Shares Owned Directly." Redemption requests by corporate and fiduciary shareholders must be accompanied by appropriate documentation establishing the authority of the person seeking to act on behalf of the account. Investors may obtain from the Fund or the transfer agent forms of resolutions and other documentation which have been prepared in advance to assist compliance with the Portfolio's procedures.
During times of drastic economic or market conditions, investors may experience difficulty in contacting Bear Stearns, the Distributor or the investor's broker by telephone to request a redemption of Portfolio shares. In such cases, investors should consider using the other redemption procedures described herein. Use of these other redemption procedures may result in the redemption request being processed at a later time than it would have been if telephone redemption had been used.
AUTOMATIC WITHDRAWAL. Automatic withdrawal permits investors to request withdrawal of a specified dollar amount (minimum of $25) on either a monthly or quarterly basis if the investor has a $5,000 minimum account. An application for
automatic withdrawal can be obtained from Bear Stearns, the Distributor, the investor's broker, or the transfer agent. Automatic withdrawal may be ended at any time by the investor, the Fund or the transfer agent. Shares for which certificates have been issued may not be redeemed through automatic withdrawal. Purchases of additional shares concurrently with withdrawals generally are undesirable.
ADDITIONAL REDEMPTION INFORMATION. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds. During the period prior to the time Shares are redeemed, dividends on such Shares will accrue and be payable.
The Fund imposes no charge when Shares are redeemed, except as described below. The Fund reserves the right to redeem any account in the Class involuntarily, on 30 days' notice, if such account falls below $500 and during such 30-day period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
A shareholder may have redemption proceeds of $1 million or more wired to the shareholder's brokerage account or a commercial bank account designated by the shareholder. A transaction fee of $7.50 will be charged for payments by wire. Questions about this option, or redemption requirements generally, should be referred to the shareholder's Bear Stearns account executive, to the investor's broker, or to the transfer agent if the shares are not held in a brokerage account.
EXCHANGE OF SHARES
EXCHANGE PRIVILEGE
The exchange privilege enables an investor to purchase shares of the Portfolio in exchange for shares of the other mutual funds sponsored or advised by Bear Stearns, to the extent such shares are offered for sale in the investor's state of residence. These funds have different investment objectives than the Money Market Portfolio. To use this privilege, investors should consult their account executive at Bear Stearns, their investment dealers who have sales agreements with Bear Stearns, the Distributor, the investor's broker or the Transfer Agent to determine if it is available and whether any conditions are imposed on its use. Currently, exchanges may be made among the following portfolios (and such additional portfolios which may be added in the future):
o Emerging Markets Debt Portfolio
o S&P STARS Portfolio
o Large Cap Value Portfolio
o Small Cap Value Portfolio
o Total Return Bond Portfolio
o The Insiders Select Fund
To effect an exchange of Shares, exchange instructions must be given to the transfer agent in writing or by telephone. A shareholder wishing to make an exchange may do so by sending a written request to PFPC, Attention: The RBB Fund--Money Market Portfolio (Bedford Class), P.O. Box 8960, Wilmington, Delaware 19899. Shareholders are automatically provided with telephone exchange privileges when opening an account, unless they indicate otherwise on the account application. Shareholders holding share certificates are not eligible to exchange shares of the Portfolio by phone because share certificates must accompany all exchange requests. To add this feature to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with the transfer agent. This form is available from the transfer agent. Once this election has been made, the shareholder may contact the Transfer Agent by telephone at (800) 447-1139 to request the exchange. See "Redemption Procedures--Redemption of Shares Owned Directly" for a description of the Fund's telephone transaction procedures. During periods of substantial economic or market change, telephone exchanges may be difficult to complete and shareholders may have to submit exchange requests to the transfer agent in writing.
If the exchanging shareholder does not currently own shares of the Portfolio or fund whose shares are being acquired, a new account will be established with the same registration, dividend and capital gain options and the same dealer of record as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed as described above. To participate in the Systematic Investment Plan or establish automatic withdrawal for the new account, however, an exchanging shareholder must file a specific written request. The exchange privilege may be modified or terminated at any time, or from time to time, by the Fund on 60 days' notice to affected portfolio or fund shareholders.
Before any exchange, the investor must obtain and should review a copy of the current prospectus of the portfolio or fund into which the exchange is being made. Prospectuses may be obtained from Bear Stearns. Except in the case of Personal Retirement Plans, the Shares being exchanged must have a current value of at least $250; furthermore, when establishing a new account by exchange, the
shares being exchanged must have a value of at least the minimum initial investment required for the portfolio or fund into which the exchange is being made. If making an exchange to an existing account, the dollar value must equal or exceed the applicable minimum for subsequent investments. If any amount remains in the investment portfolio from which the exchange is being made, such amount must not be below the minimum account value required by the portfolio or fund.
Shares will be exchanged at the next determined public offering price. To qualify for the exchange privilege, at the time of the exchange, the investor must notify Bear Stearns, the Distributor, his investment dealer or the transfer agent. Any such qualification is subject to confirmation of the investor's holdings through a check of appropriate records. No fees currently are charged shareholders directly in connection with exchanges, although the Fund reserves the right, upon not less than 60 days' written notice, to charge shareholders a $5.00 fee in accordance with rules promulgated by the Securities and Exchange Commission. The Fund reserves the right to reject any exchange request in whole or in part. The Exchange Privilege may be modified or terminated at any time upon notice to shareholders.
The exchange of shares of one portfolio or fund for shares of another is treated for federal income tax purposes as a sale of the shares given in exchange by the shareholder and, therefore, an exchanging shareholder may realize a taxable gain or loss.
REDIRECTED DISTRIBUTION OPTION.
The Redirected Distribution Option enables a shareholder to invest automatically dividends or dividends and capital gain distributions, if any, paid by the Portfolio in shares of another portfolio of the Fund or a fund advised or sponsored by Bear Stearns of which the shareholder is an investor. Shares of the other portfolio or fund will be purchased at the then current public offering price; however, a sales load may be charged with respect to investments in shares of a portfolio or fund sold with a sales load. If the shareholder is investing in a fund that charges a sales load, such shareholder may qualify for share prices which do not include the sales load or which reflect a reduced sales load.
This privilege is available only for existing accounts and may not be used to open new accounts. Minimum subsequent investments do not apply. The Fund may modify or terminate this privilege at any time or charge a service fee. No such fee currently is contemplated.
The net asset value per share of each class of the Portfolio for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value for each class of the Fund is calculated by adding the value of the proportionate interest of the class in the securities, cash and other assets of the Portfolio, deducting the actual and accrued liabilities of such class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of a portfolio is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for the Portfolio a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, the Portfolio may use a pricing service, bank or broker dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
BOARD OF DIRECTORS
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. The Class represents interests in the Fund's Money Market Portfolio.
INVESTMENT ADVISER
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for the Portfolio. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $_____ billion of assets, of which approximately $_____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolio, BIMC manages such Portfolio and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for the Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreement between BIMC and RBB with respect to the Money Market Portfolio provides for BIMC to also assist generally in supervising the operations of such Portfolio, and to maintain the Portfolio's financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of the Money Market Portfolio, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for the Portfolio.
For the Fund's fiscal year ended August 31, 1998, the Fund paid investment advisory fees aggregating ___% of the average daily net assets of the Money Market Portfolio. For that same year, BIMC waived approximately ___ of the average daily net assets of the Money Market Portfolio.
PNC Bank was formerly sub-adviser to the Portfolio and provided research, credit analysis and recommendations with respect to the Portfolio's investments and supplied certain computer facilities, personnel and other services. The
facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by the Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Fund to BIMC. The services provided by BIMC and the fees payable by the Fund for these services are described further in the Statement of Additional Information under "Management of the Company."
ADMINISTRATOR
Pursuant to its advisory agreement with the Fund with respect to the Money Market Portfolio, BIMC provides administrative services to such Portfolio, and is entitled to receive an administration fee, computed daily and payable monthly at a rate of .10% of the average daily net assets of the Portfolio. BIMC has delegated to PFPC all of its accounting and administrative obligations under such agreement. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolio to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND CUSTODIAN
PNC Bank also serves as the Fund's custodian and PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support services to customers of such broker/dealers who are shareholders of the Portfolio. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
DISTRIBUTOR
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as Distributor of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
EXPENSES
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based on the relative net assets of the investment portfolios at the time such expenses were accrued. The Bedford Class of the Fund pays its own distribution fees, and
may pay a different share than other classes of the Fund of other expenses (excluding advisory and custodial fees) if these expenses are actually incurred in a different amount by the Bedford Class or if it receives different services.
The investment adviser may assume expenses of the Portfolio from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolio for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of lowering a Portfolio's expense ratio and of increasing yield to investors.
For the Fund's fiscal year ended August 31, 1998, the Fund's total expenses were ____% of the average daily net assets with respect to the Class of the Money Market Portfolio (not taking into account waivers and reimbursements of ____%).
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plan of Distribution for the Class (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the Class. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plan in the amount of .60% of the average daily net assets of the Class on an annualized basis in any year. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to the Class on any day to the extent necessary to assure that the fee required to be accrued by the Class does not exceed the income of the Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of the Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Class the fee agreed to under the Distribution Agreement. Payments under the Plan are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Portfolio to the Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by the Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ____ billion shares are currently classified into _____ different classes of Common Stock ( see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in the Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreements entered into with the Distributor and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BEDFORD SHARES OF THE MONEY MARKET PORTFOLIO AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE BEDFORD SHARES OF THE MONEY MARKET PORTFOLIO.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of the Portfolio will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of _____________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC, the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (800) 447-1139.
THE
BEAR STEARNS
FUNDS
235 Park Avenue
New York, New York 10167
1-800-766-4111
MONEY MARKET
PORTFOLIO
INVESTMENT ADVISER
BlackRock Institutional Management Corporation
Wilmington, Delaware
CUSTODIAN
PNC Bank, National Association
Philadelphia, Pennsylvania
ADMINISTRATOR AND TRANSFER AGENT
PFPC Inc.
Wilmington, Delaware
COUNSEL
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
BEDFORD
MUNICIPAL
MONEY MARKET
PORTFOLIO
PROSPECTUS
December __, 1998
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
INTRODUCTION........................................
FINANCIAL HIGHLIGHTS................................
INVESTMENT OBJECTIVE AND POLICIES................... YEAR 2000........................................... INVESTMENT LIMITATIONS.............................. PURCHASE AND REDEMPTION OF SHARES...................
NET ASSET VALUE.....................................
MANAGEMENT.......................................... DISTRIBUTION OF SHARES..............................
DIVIDENDS AND DISTRIBUTIONS......................... TAXES.............................................. DESCRIPTION OF SHARES............................... OTHER INFORMATION...................................
INVESTMENT ADVISER
BlackRock Institutional Management Corporation
Wilmington, Delaware
CUSTODIAN
PNC Bank, National Association
Philadelphia, Pennsylvania
ADMINISTRATOR AND TRANSFER AGENT
PFPC Inc.
Wilmington, Delaware
COUNSEL
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
BEDFORD
MUNICIPAL MONEY MARKET PORTFOLIO
OF
THE RBB FUND, INC.
The Bedford Shares of the Municipal Money Market Portfolio (THE "MUNICIPAL MONEY MARKET PORTFOLIO" OR THE "PORTFOLIO") are a class of shares of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company. Shares of the class offered by this Prospectus represent interests in the Portfolio.
The investment objective of the Municipal Money Market Portfolio is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
BlackRock Institutional Management Corporation serves as investment adviser for the Portfolio. PNC Bank, National Association serves as custodian for the Fund and PFPC Inc. serves as administrator of the Portfolio and the transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the SEC Internet Website (http://www.sec.gov).
PROSPECTUS DECEMBER __, 1998
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares ("Shares") of the Bedford Class (the "Class") of common stock of the Fund offered by this Prospectus represent interests in the Fund's Municipal Money Market Portfolio.
The investment objective of the Municipal Money Market Portfolio is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks to the Portfolio. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax, but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Portfolio seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolio will be able to maintain a stable net asset value of $1.00 per share.
The Portfolio's investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund and PFPC Inc. ("PFPC") serves as the administrator to the Portfolio and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in the Portfolio is subject to certain risks, as set forth in detail under "Investment Objective and Policies." The Portfolio, to the extent set forth under "Investment Objective and Policies," may engage in the purchase of securities on a "when-issued" or "forward commitment" basis, and the purchase of stand-by commitments. These transactions involve certain special risks, as set forth under "Investment Objective and Policies."
FEE TABLE
The Fee Table below contains a summary of the annual operating expenses of the Bedford Class of the Municipal Money Market Portfolio based on expenses incurred for the fiscal year ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
ANNUAL FUND OPERATING EXPENSES (BEDFORD CLASS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
Management Fees (after waivers)(1)..........................................___%
12b-1 Fees(1)...............................................................___%
Other Expenses(1)........................................................... %
Total Fund Operating Expenses (Bedford Class)
(after waivers and reimbursements)(1).......................................===%
(1) Management Fees and 12b-1 Fees are based on average daily net assets
and are calculated daily and paid monthly. Before waivers for the
Bedford Municipal Money Market Portfolio, Management Fees would be
___%, and Total Fund Operating Expenses would be ____%.
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EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Municipal Money Market
Portfolio* $ $ $ $
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*Other Classes of this Portfolio are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Long-term Shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Bedford Class of the Portfolio will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management-Investment Adviser," and "Distribution of Shares" below.) Expense figures are based on actual costs and
fees charged to the Class. The Fee Table reflects a voluntary waiver of Management Fees for the Class. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolio, such assumption will have the effect of lowering the Portfolio's overall expense ratio and increasing its yield to investors.
From time to time the Class advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of the Class refers to the income generated by an investment in the Class over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in the Class is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. The "tax-equivalent yield" of the Class may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to the tax-free yield of the Class. This is done by increasing the yield of the Class (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their shareholders in connection with investments in the Class are not reflected in the total return and yield of the Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Class may differ from the total return and yields on shares of other classes of the Fund that also represent interests in the Portfolio depending on the allocation of expenses to each class of the Portfolio. See "Expenses."
The table below sets forth certain information concerning the investment results of the Bedford Class of the Municipal Money Market Portfolio for the periods indicated. The financial data included in this table for each of the periods ended August 31, 1994 through August 31, 1998, are a part of the Fund's financial statements for the Portfolio which are incorporated by reference into the Statement of Additional Information and have been audited by _______________________________________________________, the Fund's independent accountants. The financial data for the Portfolio for the periods ended August 31, 1989, 1990, 1991, 1992 and 1993 are a part of previous financial statements audited by __________________________. The financial data included in the table should be read in conjunction with the financial statements and notes thereto. Further information about the performance of the Portfolio is available in the Annual Report to Shareholders. Both the Statement of Additional Information, and the Annual Report to Shareholders may be obtained free of charge by calling the telephone number on page 1 of this Prospectus.
THE BEDFORD FAMILY
THE RBB FUND, INC FINANCIAL HIGHLIGHTS (C)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Municipal Money Market Portfolio
-----------------------------------------------------------------------------------------------------------
For the For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31, August 31, August 31,
1998 1997 1996 1995 1994 1993
------------------------------------------------------------------------------------------------------------- ----------
Net asset value, beginning of period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income.................... 0.0285 0.0288 0.0297 0.0195 0.0195
Net gains on securities (both realized
and unrealized)....................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 0.0285 0.0288 0.0297 0.0195 0.0195
---------- ---------- ---------- ---------- ----------
Less distributions
Dividends (from net investment income)... (0.0285) (0.0288) (0.0297) (0.0195) (0.0195
Distributions (from capital gains)....... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions.................... (0.0285) $(0.0288) $(0.0297) $(0.0195) $(0.0195
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return............................... 2.88% 2.92% 3.01% 1.97% 1.96%
Ratios/Supplemental Data
Net Assets, end of period (000).......... $ 213,034 $ 201,940 $ 198,425 $ 182,480 $ 215,577
Ratios of expenses to average net assets .85%(a) .84%(a) .82%(a) .77%(a) .77%(a)
Ratios of net invest income to
average net assets..................... 2.85% 2.88% 2.97% 1.95% 1.95%
For the Period
For the For the For the September 30, 1988
Year Ended Year Ended Year Ended (Commencement of
August 31, August 31, August 31, Operations)
1992 1991 1990 to August 31, 1989
------------------------------------------------------------------------------------------------------
Net asset value, beginning of period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------
Income from investment operations:
Net investment income.................... 0.0287 0.0431 0.0522 0.0513
Net gains on securities (both realized
and unrealized)....................... -- -- -- --
---------- ---------- ---------- ----------
Total from investment operations........... 0.0287 0.0431 0.0522 0.0513
---------- ---------- ---------- ----------
Less distributions
Dividends (from net investment income)... (0.0287) (0.0431) (0.0522) (0.0513)
Distributions (from capital gains)....... -- -- -- --
---------- ---------- ---------- ----------
Total distributions.................... $(0.0287) $(0.0431) $(0.0522) $(0.0513)
---------- ---------- ---------- ----------
Net asset value, end of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total return............................... 2.90% 4.40% 5.35% 5.72%
Ratios/Supplemental Data
Net Assets, end of period (000).......... $ 176,950 $ 215,140 $ 195,566 $ 85,806
Ratios of expenses to average net assets .77%(a) .74%(a) .75%(a) .73%(a)(b)
Ratios of net invest income to
average net assets..................... 2.87% 4.31% 5.22% 5.70%
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(a) Without the waiver of advisory and administration fees, and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Municipal Money Market Portfolio would have been _____%, 1.14%, 1.12%, 1.14%, 1.12%, 1.16%, 1.15%, 1.13% and 1.14% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively, and 1.27% annualized for the period ended August 31, 1989.
(b) Annualized
(c) Financial Highlights relate solely to the Bedford Class of Shares within the Portfolio.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax and which meet certain ratings criteria and present minimal credit risks. See "Eligible Securities". During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities, the interest on which is exempt from the regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Portfolio will be achieved.
MUNICIPAL OBLIGATIONS. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase securities that are unrated at the time of purchase provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations whose issuers are in the same state, (ii) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects or are issued by issuers located in the same state, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated.
TAX-EXEMPT DERIVATIVE SECURITIES. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
WHEN-ISSUED SECURITIES. The Portfolio may also purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal
Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
ELIGIBLE SECURITIES. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two highest rating categories by at least two Rating Organizations ("Rating Organizations") for such securities (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P"), or rated "Prime-l" or "Prime-2" by Moody's Investors Service, Inc. ("Moody's")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest categories for such securities; (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) and securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in
achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
The Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Municipal Money Market Portfolio may not:
1. Purchase the securities of any issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to this 5% limitation.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested at the time of purchase in obligations of issuers in the same industry.
In addition, the Portfolio may not, without Shareholder approval, change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"), the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
PURCHASE PROCEDURES
GENERAL. Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Shares through an account maintained by the investor with his brokerage firm (an "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by PFPC after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by PFPC as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
PURCHASES THROUGH AN ACCOUNT. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investor Account requirements. Even if a broker does
not impose a sales charge for purchases of Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker. This Prospectus should be read in conjunction with any information received from a broker. Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker.
If a broker makes special arrangements under which orders for Shares are received by PFPC prior to 12:00 noon Eastern Time and the broker guarantees that payment for such Shares will be made in available Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
DIRECT PURCHASES. An investor may also make direct investments in Shares at any time through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment by mail by fully completing and signing an application obtained from a Dealer (an "Application") and mailing it, together with a check payable to "Bedford Municipal Money Market" to "Bedford Municipal Money Market," c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares by having his bank or Dealer wire Federal Funds to the Fund's custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800)533-7719 (in Delaware call collect (302) 791-1196), and provide your name, address, telephone number, Social Security or Tax Identification Number, the amount being
wired, and by which bank or Dealer. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the custodian:
PNC Bank, N.A., Philadelphia, PA
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of Portfolio) AMOUNT: (amount to be invested)
C. Complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchase orders until it receives a completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
RETIREMENT PLANS. Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
REDEMPTION PROCEDURES
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
It is the responsibility of the Dealer to transmit promptly to PFPC a customer's redemption request. In the case of shareholders holding share certificates, the certificates must accompany the redemption request. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
REDEMPTION OF SHARES IN AN ACCOUNT. An investor who beneficially owns Shares through an Account may redeem Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and
the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
REDEMPTION OF SHARES OWNED DIRECTLY. A direct investor may redeem any number of Shares by sending a written request to "Bedford Municipal Money Market," c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are the Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by calling (888) 261-4073. Neither the Fund, the Portfolio, the Distributor, PFPC nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; (6) and maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers (other than the Distributor), financial institutions, securities dealers, financial planners or other industry professionals, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by an attorney-in-fact under power of attorney.
The proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization Form that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE, will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. There is no minimum redemption for proceeds mailed by check; however, the maximum redemption for proceeds mailed by check is $25,000. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
REDEMPTION BY CHECK. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors with joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cashed at other banks.
ADDITIONAL REDEMPTION INFORMATION. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to
Shares purchased by wire payment. Investors should consider purchasing Shares with a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in the Class involuntarily, on 30 days' notice, if such account falls below $500 and during such 30-day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
The net asset value per share of each class of the Portfolio for the purpose of pricing purchase and redemption orders is determined twice each day once as of 12:00 noon Eastern Time and once, as of the close of regular trading of the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class of the Portfolio is calculated by adding the value of the proportionate interest of the class in the securities, cash and other assets of the Portfolio, deducting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of the Fund is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for the Portfolio a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, the Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
BOARD OF DIRECTORS
The business and affairs of the Fund and each investment portfolio of the Fund are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen investment portfolios. The Municipal Money Market Portfolio is one of these portfolios.
INVESTMENT ADVISER
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for the Municipal Money Market Portfolio. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $__________ billion of assets, of which approximately $______ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp, Inc. PNC Bancorp Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolio, BIMC manages the Portfolio and is responsible for all purchases and sales of portfolio securities. In entering into portfolio transactions for the Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution.
For the services provided to and expenses assumed by it for the benefit of the Portfolio, BIMC is entitled to receive from the Portfolio a fee, computed daily and payable monthly, at an annual rate of .35% of the first $250 million of the Portfolio's average daily net assets, .30% of the next $250 million of the Portfolio's average daily net assets and .25% of the average daily net assets of the Portfolio in excess of $500 million. BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for the Portfolio.
For the Fund's fiscal year ended August 31, 1998, the Fund paid investment advisory fees aggregating __% of the average net assets of the Portfolio. For that same year, BIMC waived approximately __% of investment advisory fees payable to it with respect to the Portfolio.
PNC Bank was formerly sub-adviser to the Portfolio and provided research, credit analysis and recommendations with respect to the Portfolio's
investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by the Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolio to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
ADMINISTRATOR
PFPC serves as the administrator for the Municipal Money Market Portfolio and generally assists the Portfolio in all aspects of its administration and operation, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at a rate of .10% of the average daily net assets of the Portfolio. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND CUSTODIAN
PNC Bank serves as the Fund's custodian and PFPC, an indirect wholly owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support services to customers of such broker/dealers who are shareholders of the Portfolio. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
DISTRIBUTOR
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as Distributor of the Shares pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
EXPENSES
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based on the relative net assets of the investment portfolios at the time such expenses were accrued. The Bedford Classes of the Fund pay their own distribution fees, and may pay a different share than other classes of the Fund
of other expenses (excluding advisory and custodial fees if these expenses are actually incurred in a different amount by the Bedford Classes or if they receive different services.
The investment adviser may assume additional expenses of the Portfolio from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolio for such amounts prior to the end of a fiscal year. In such event, reimbursement of such amounts will have the effect of increasing the Portfolio's expense ratio and of lowering yield to investors.
For the fiscal year ended August 31, 1998, total expenses were _____% of average net assets with respect to the Bedford Class of the Municipal Money Market Portfolio (not taking into account waivers of __%).
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plan of Distribution for the Class (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plan in the amount of .60% of the average daily net assets of the Class on an annualized basis in any year. Such compensation may be increased, up to the amount permitted in the Plan, with the approval of the Fund's Board of Directors. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to the Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the Plan, the Distributor may reallocate an amount up to the full fee that it receives to Dealers based upon the aggregate investment amounts maintained by and services provided to shareholders of the Class serviced by such Dealers. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Class the fee agreed to under the Distribution Agreement. Payments under the Plan are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Municipal Money Market Portfolio to the Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by the Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolio's investments, that a portion of the Portfolio's distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _______billion shares are currently classified into ___different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in the Municipal Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of common stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BEDFORD CLASS OF THE MUNICIPAL MONEY
MARKET PORTFOLIO AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO SUCH CLASS OF THIS PORTFOLIO.
Each share that represents an interest in the Portfolio has an equal proportionate interest in the assets belonging to the Portfolio with each other share that represents an interest in the Portfolio, even where a share has a different class designation than another share representing an interest in the Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of the Portfolio will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of common stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
OTHER INFORMATION
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE BEDFORD
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH GOVERNMENT
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS OBLIGATIONS
HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THIS MONEY MARKET
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY PORTFOLIO
THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
Prospectus
--------------------------------------------------------------
CONTENTS
Page
INTRODUCTION........................................
FINANCIAL HIGHLIGHTS................................
INVESTMENT OBJECTIVE AND POLICIES...................
YEAR 2000...........................................
INVESTMENT LIMITATIONS..............................
PURCHASE AND REDEMPTION OF SHARES...................
NET ASSET VALUE.....................................
MANAGEMENT..........................................
DISTRIBUTION OF SHARES..............................
DIVIDENDS AND DISTRIBUTIONS.........................
TAXES...............................................
DESCRIPTION OF SHARES...............................
OTHER INFORMATION...................................
Investment Adviser December __, 1998
BlackRock Institutional Management Corporation
Wilmington, Delaware
|
Custodian
PNC Bank, National Association
Philadelphia, Pennsylvania
Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants
BEDFORD
GOVERNMENT OBLIGATIONS
MONEY MARKET PORTFOLIO
of
The RBB Fund, Inc.
The investment objective of the Government Obligations Money Market Portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. The Government Obligations Money Market Portfolio seeks to achieve such objective by investing in short-term U.S. Treasury bills and notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The Bedford shares of the Government Obligations Money Market Portfolio (the "Government Obligations Money Market Portfolio" or the "Portfolio") are a class of shares of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company. Shares of the Class are offered by this Prospectus and represent interests in the Portfolio.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. There can be no assurance that the Portfolio will be able to maintain a stable not asset value of $1.00 per share.
BlackRock Institutional Management Corporation serves as investment adviser for the Portfolio, PNC Bank, National Association serves as custodian for the Fund, and PFPC Inc. serves as administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the Internet Website (http://www.sec.gov).
PROSPECTUS December __, 1998
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares ("Shares") offered by this Prospectus are a class ("Class") of the shares of common stock of the Fund and represent interests in the Fund's Government Obligations Money Market Portfolio.
The investment objective of the Portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills and notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
The Portfolio seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolio will be able to maintain a stable net asset value of $1.00 per share.
The Portfolio's investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian for the Fund and PFPC Inc. ("PFPC") serves as administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's shares.
An investor may purchase and redeem Shares through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in the Portfolio is subject to certain risks, as set forth in detail under "Investment Objective and Policies." The Portfolio, to the extent set forth under "Investment Objective and Policies," may engage in the following investment practices among others: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objective and Policies."
FEE TABLE
The Fee Table below contains a summary of annual fund operating expenses incurred by the Government Obligations Money Market Portfolio during the fiscal year ended August 31, 1998 as a percentage of average daily net assets. An example based on the summary is also provided.
Annual Fund Operating Expenses (Bedford Class)
as a percentage of average daily net assets
Management Fees (after waivers)(1) .___%
12b-1 Fees(1) .___%
Other Expenses(1) .___%
Total Fund Operating Expenses
(Bedford Class) (after waivers)(1) .===%
|
(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Government Obligations Money Market Portfolio, Management Fees would be ___% and Total Fund Operating Expenses would be ___%.
Example
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and(2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Government Obligations
Money Market Portfolio*
(Bedford Class) $___ $___ $___ $___
|
* Other classes of this Portfolio are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Bedford Class)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charge permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Bedford Class of the Portfolio will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management -- Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on actual costs and fees charged to the Class. The Fee Table reflects a voluntary waiver of Management Fees for the Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of a Portfolio, such assumption will have the effect of lowering such Portfolio's overall expense ratio and increasing its yield to investors.
From time to time, the Class advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Class refers to the income generated by an investment in the Class over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in the Class is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in the Class are not reflected in the total return and yield of Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Class may differ from the total return and yields on shares of other classes of the Fund that also represent interests in the Portfolio depending on the allocation of expenses to each class of the Portfolio. See "Expenses."
The table below sets forth certain information concerning the investment results of the Bedford Class of the Government Obligations Money Market Portfolio for the periods indicated. The financial data included in this table for each of the periods ended August 31, 1994 through August 31, 1998 are part of the Fund's financial statements for the Portfolio, which have been incorporated by reference into the Statement of Additional Information and have been audited by _______________________________________________________, the Fund's independent accountants. The financial data for the Portfolio for the periods ended August 31, 1989, 1990, 1991, 1992 and 1993 are part of previous financial statements audited by _________________________. The financial data should be read in conjunction with the financial statements and notes thereto. Further information about the performance of the Portfolio is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained free of charge by calling the telephone number on page 1 of this Prospectus.
Bedford Class of the Government Obligations Money Market Portfolio
The RBB Fund Inc. Financial Highlights (c)
(for a Share Outstanding Throughout each Period)
Government Obligations Money Market Portfolio
---------------------------------------------------------------------------------------------------------
For the For the For the For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31, August 31, August 31, August 31, August 31,
1998 1997 1996 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- -------
Income from investment
Operations:
Net investment income............. 0.0449 0.0458 0.0475 0.0270 0.0231 0.0375 0.0604
Net gains on
securities both realized
Unrealized)................... -- -- -- -- -- 0.0009 --
------- ------- ------- ------- ------- ------- -------
Total from
investment operations......... 0.0449 0.0458 0.0475 0.0270 0.0231 0.0384 0.0604
------- ------- ------- ------- ------- ------- -------
---------------------------------
For the Period
September 30,
For the 1988
Year Ended (Commencement
August 31, of Operations)
1990 to
August 31, 1989
---------------------------------
Net asset value,
beginning of period............... $ 1.00 $ 1.00
------- -------
Income from investment
Operations:
Net investment income............. 0.0748 0.0725
Net gains on
securities both realized
and Unrealized)............... -- --
------- -------
Total from investment
operations........................ 0.0748 0.0725
------- -------
|
Less distributions
Dividends (from net
investment income)............ (0.0449) (0.0458) (0.0475) (0.0270) (0.0231) (0.0375) (0.0604)
Distributions (from
capital gains)................ -- -- -- -- -- (0.0009) --
-------- -------- --------- --------- -------- ------- -------
Total distributions............. (0.0449) (0.0458) (0.0475) (0.0270) (0.0231) (0.0384) (0.0604)
-------- -------- --------- --------- -------- ------- -------
Net asset value, end of
period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========= ========= ======== ======= ========
Total return...................... 4.59% 4.68% 4.86% 2.73% 2.33% 3.91% 6.21%
Ratios/Supplemental Data
Net Assets, end of
period (000).................... $209,715 $192,599 $163,398 $166,418 $213,741 225,101 $368,899
Ratios of expenses to
average net assets.............. .975%(a) .975%(a) .975%(a) .975%(a) .975%(a) .975%(a) .95%(a)
Ratios of net investment
income to average
net assets...................... 4.49% 4.58% 4.75% 2.70% 2.31% 3.75% 6.04%
|
Less distributions
Dividends (from net
investment income)............ (0.0748) (0.0725)
Distributions (from
capital gains)................ --
-------- -------
Total distributions............. (0.0748) (0.0725)
-------- --------
Net asset value, end of
period.......................... $ 1.00 $ 1.00
======== =======
Total return...................... 7.74% 8.64%(b)
Ratios/Supplemental Data
Net Assets, end of
period (000).................... $209,378 $66,281
Ratios of expenses to
average net assets.............. .95%(a) .96%(a)(b)
Ratios of net investment
income to average
net assets...................... 7.48% 8.34%(b)
|
(a) Without the waiver of advisory fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Government Obligations Money Market Portfolio would have been ____%, 1.09%, 1.10%, 1.13%, 1.17%, 1.18%, 1.12%, 1.13% and 1.17% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively, and 1.40% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Bedford Class of shares of the
Government Obligations Money Market Portfolio.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal. There is no assurance that the investment objective of the Government Obligations Money Market Portfolio will be achieved.
Securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities have historically involved little risk of loss of principal if held to maturity. However, due to fluctuations in interest rates, the market value of such securities may vary during the period a shareholder owns Shares representing interests in the Portfolio. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values.
Repurchase Agreements. The Portfolio may agree to purchase government securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delay in connection with the disposition of the underlying obligations.
Reverse Repurchase Agreements. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the portfolio securities sold by the Portfolio may decline below the price at which
the Portfolio is obligated to repurchase them. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Mortgage-Related Securities. Mortgage-related securities consist of mortgage loans, which are assembled into pools, the interests on which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself.
Asset-Backed Securities. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
Lending of Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
The Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The investment limitations summarized below may not be changed, however, without shareholder approval. (A more detailed description of the following investment limitations is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings in excess of 5% of the Portfolio's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the
securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
Purchase Procedures
General. Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Shares through an account maintained by the investor with his brokerage firm (an "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by PFPC after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
Purchases through an Account. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Shares, depending on the terms of an investor's Account with his broker, the broker may charge investors Account fees for automatic
investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker.
Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker.
If a broker makes special arrangements under which orders for Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made in available Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
Direct Purchases. An investor may also make direct investments in Shares at any time through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment by mail by fully completing and signing an application obtained from a Dealer (an "Application") and mailing it, together with a check payable to "Bedford Government Obligations Money Market" to Bedford Government Obligations Money Market Portfolio, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares by having his bank or Dealer wire Federal Funds to the Fund's custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 533-7719 (in Delaware call collect (302) 791-1196), and provide your name, address, telephone number, Social Security or Tax Identification Number, the amount being wired, and by which bank or Dealer. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the custodian:
PNC Bank, N.A., Philadelphia, PA
ABA-0310-0005-3
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the
Portfolio)
FOR PURCHASE OF: (name of Portfolio)
AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Retirement Plans. Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption Procedures
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
Redemption of Shares In an Account. An investor who beneficially owns Shares through an Account may redeem Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading of the NYSE on a Business Day, the redemption will be effective as of the close of regular trading of the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written request, to Bedford Government Obligations Money Market, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by calling (888) 261-4073. Neither the Fund, the Portfolio, the Distributor, PFPC nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers (other
than the Distributor), financial institutions, securities dealers, financial
planners or other industry professionals, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by
attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization Form that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading of the NYSE will result in redemption proceeds being wired to the
investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cashed at other banks.
Additional Redemption Information. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in the Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
The net asset value per share of each class of the Portfolio for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday, with the
exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed, as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the value of the proportionate interest of the class in the securities, cash and other assets of the Portfolio, subtracting the actual and accrued liabilities of such class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of the Portfolio is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for the Portfolio a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, the Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
Board of Directors
The business and affairs of the Fund and Portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen investment portfolios. The Government Obligations Money Market Portfolio is one of these portfolios.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for the Portfolio. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolio, BIMC manages the Portfolio and is responsible for all purchases and sales of portfolio securities. In entering into transactions for the Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreement between BIMC and RBB with respect to the Government Obligations Money Market Portfolio provides for BIMC to also assist generally in supervising the operations of such Portfolio, and to maintain the Portfolio's financial account and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of the Portfolio, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million. BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for the Portfolio.
For the Fund's fiscal year ended August 31, 1998 the Fund paid investment advisory fees aggregating ____% of the average net assets of the Portfolio. For that same year, BIMC waived approximately _____% of the advisory fees payable with respect to the Portfolio.
PNC Bank was formerly sub-adviser to the Portfolio and provided research, credit analysis and recommendations with respect to the Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by the Portfolio to BIMC. Such sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolio to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
Administrator
Pursuant to its advisory agreement with the Fund with respect to the Government Obligations Portfolio, BIMC provides administrative services to the Portfolio, and is entitled to an administration fee, computed daily and payable monthly at .10% of average daily net assets of the Portfolio. BIMC has delegated to PFPC all of its accounting and
administrative obligations under such advisory agreement. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Government Obligations Portfolio which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolio to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent and Custodian
PNC Bank also serves as the Fund's custodian and PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support services to customers of such dealers who are shareholders of the Portfolio. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor of the Shares pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of the Portfolio are deducted from the total income of the Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. The Bedford Class of the Fund pays its own distribution fees, and may pay a different share than other classes of the Fund of other expenses (excluding advisory and custodial fees) if these expenses are actually incurred in a different amount by the Bedford Class or if it received different services.
The investment adviser may assume expenses of the Portfolio from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolio for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing the Portfolio's expense ratio and of lowering yield to investors.
For the Fund's fiscal year ended August 31, 1998, the Fund's total expenses were ____% of average net assets with respect to the Bedford Class of the Portfolio (not taking into account waivers and reimbursements of ___%).
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plan of Distribution for the Class (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the Class. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plan in the amount of .60% of the average daily net assets of the Class on an annualized basis in any year. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to the Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of the Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Class the fee agreed to under the Distribution Agreement. Payments under the Plan are not based on expenses actually incurred by the Distributor and the payments may exceed distribution expenses actually incurred.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Portfolio to the Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by the Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock ( see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in the Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within this Portfolio vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreements entered into with the Distributor and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BEDFORD CLASS OF THE GOVERNMENT
OBLIGATIONS MONEY MARKET PORTFOLIO AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THIS PORTFOLIO.
Each share that represents an interest in the Portfolio has an equal proportionate interest in the assets belonging to the Portfolio with each other share that represents an interest in the Portfolio, even where a share has a different class designation than another share representing an interest in the Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of the Portfolio will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
MUNICIPAL MONEY MARKET PORTFOLIO
GOVERNMENT OBLIGATIONS
MONEY MARKET PORTFOLIO
CONTENTS
PAGE
INTRODUCTION...........................................
FINANCIAL HIGHLIGHTS...................................
INVESTMENT OBJECTIVES AND POLICIES..................... YEAR 2000.............................................. INVESTMENT LIMITATIONS................................. PURCHASE AND REDEMPTION OF SHARES......................
NET ASSET VALUE........................................
MANAGEMENT............................................. DISTRIBUTION OF SHARES.................................
DIVIDENDS AND DISTRIBUTIONS............................
TAXES
DESCRIPTION OF SHARES..................................
OTHER INFORMATION......................................
INVESTMENT ADVISER
BlackRock Institutional Management Corporation
Wilmington, Delaware
CUSTODIAN
PNC Bank, National Association
Philadelphia, Pennsylvania
ADMINISTRATOR AND TRANSFER AGENT
PFPC Inc.
Wilmington, Delaware
COUNSEL
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
THE BEDFORD FAMILY
OF
THE RBB FUND, INC.
The three classes of common stock (each, a "Bedford Class") of The RBB Fund, Inc. (the "Fund"), an open-end management investment company, offered by this Prospectus represent interests in a taxable money market portfolio, a municipal money market portfolio and a U.S. Government obligations money market portfolio (together, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
MONEY MARKET PORTFOLIO -- to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
MUNICIPAL MONEY MARKET PORTFOLIO -- to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO -- to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, AT ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIOS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
BlackRock Institutional Management Corporation serves as investment adviser for the Portfolios, PNC Bank, National Association serves as custodian for the Fund and PFPC Inc. serves as administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December__, 1998, has been filed with
the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the SEC Internet Website (http://www.sec.gov).
PROSPECTUS DECEMBER __, 1998
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. Each of the three classes of the Fund's shares (collectively, the "Bedford Shares" or "Shares") offered by this Prospectus represents interests in one of the following of such investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio.
The MONEY MARKET PORTFOLIO'S investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The MUNICIPAL MONEY MARKET PORTFOLIO'S investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO'S investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund and PFPC Inc. ("PFPC") serves as the administrator and the transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the Bedford Classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the Bedford Shares is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Any or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
ANNUAL FUND OPERATING EXPENSES (BEDFORD CLASSES)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
The Fee Table below contains a summary of the annual operating expenses of the Bedford Classes of the Portfolios based on expenses incurred for the fiscal year ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
GOVERNMENT
MUNICIPAL OBLIGATIONS
MONEY MARKET MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
Management Fees (after waivers)(1)................. .__% .__% .__%
12b-1 Fees ........................................ .__ .__ .__
Other Expenses .................................... . . .
------ ------ -----
Total Fund Operating Expenses (Bedford Classes)
(after waivers)(1)............................... . % . % . %
======= ======= ======
|
(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Municipal Money Market Portfolio and Government Obligations Money Market Portfolio, Management Fees would be ___%, ___% and ___%, respectively, and Total Fund Operating Expenses would be ____%. ____% and ____%, respectively.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Money Market*.............................................. $ $ $ $
Municipal Money Market*.................................... $ $ $ $
Government Obligations Money Market*....................... $ $ $ $
|
*Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund
Operating Expenses (Bedford Classes)" 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. Long-term Shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Bedford Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management -- Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on actual costs and fees charged to each class. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. The Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing such Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate.
The total returns yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total returns yield on Shares of any of the Bedford Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in Bedford Shares are not reflected in the total returns yield of Shares of the Bedford Classes, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total returns yield on Shares of the Bedford Classes may differ from total returns yield on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
The table below sets forth certain information concerning the investment results of the Bedford Classes representing interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios for the periods indicated. The financial data included in this table for each of the periods ended August 31, 1994 through August 31, 1998 are a part of the Fund's financial statements for each of the Portfolios, which are incorporated by reference into the Statement of Additional Information and have been audited by __________________________________________________________, the Fund's independent accountants. The financial data for each of the Portfolios for the periods ended August 31, 1989, 1990, 1991, 1992 and 1993 are a part of previous financial statements audited by _______________________. The financial data should be read in conjunction with the financial statements and notes thereto. Further information about the performance of the Portfolios is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained free of charge by calling the telephone number on page 1 of this Prospectus.
THE BEDFORD FAMILY
THE RBB FUND, INC. FINANCIAL HIGHLIGHTS (C)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
MONEY MARKET PORTFOLIO
-------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1998 1997 1996 1995 1994 1993
-------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- -------- -------- --------
Income from investment operations:
Net investment income.......... 0.0462 0.0469 0.0486 0.0278 0.0243
Net gains on securities (both
realized and unrealized)..... -- -- -- -- --
---------- ---------- -------- -------- --------
Total from investment
operations............... 0.0462 0.0469 0.0486 0.0278 0.0243
------ ------ ------ ------ ------
Less distributions
Dividends (from net investment
income)...................... (0.0462) (0.0469) (0.0486) (0.0278) (0.0243)
Distributions (from capital
gains)....................... -- -- -- -- --
---------- ---------- -------- -------- --------
Total distributions........ (0.0462) (0.0469) (0.0486) (0.0278) (0.0243)
------- ------- ------ ------ ------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ======== ======== ========
Total return..................... 4.72% 4.79% 4.97% 2.81% 2.46%
Ratios/Supplemental Data
Net assets, end of period (000) $1,392,911 $1,109,334 $935,821 $710,737 $782,153
Ratios of expenses to average
net assets................... .97%(a) .97%(a) .96%(a) .95%(a) .95%(a)
Ratios of net investment income to
average net assets........... 4.62% 4.69% 4.86% 2.78% 2.43%
|
---------------------------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 30, 1988
FOR THE FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED YEAR ENDED OPERATIONS)
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1992 1991 1990 1989
---------------------------------------------------------------------------------------------------
Net asset value,
beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- --------- ---------
Income from investment operations:
Net investment income.......... 0.0375 0.0629 0.0765 0.0779
Net gains on securities (both
realized and unrealized)..... 0.0007 -- -- --
-------- -------- ---------- ----------
Total from investment
operations............... 0.0382 0.0629 0.0765 0.0779
------ ------ ------- -------
Less distributions
Dividends (from net investment
income)...................... (0.0375) (0.0629) (0.0765) (0.0779)
Distributions (from capital
gains)....................... (0.0007) -- -- --
-------- -------- ---------- ----------
Total distributions........ (0.0382) (0.0629) (0.0765) (0.0779)
------ ------ ------- -------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========= =========
Total return..................... 3.89% 6.48% 7.92% 8.81%(b)
Ratios/Supplemental Data
Net assets, end of period (000) $736,842 $747,530 $709,757 $152,311
Ratios of expenses to average
net assets................... .95%(a) .92%(a) .92%(a) .93%(a)(b)
Ratios of net investment income to
average net assets........... 3.75% 6.29% 7.65% 8.61%(b)
|
(a) Without the waiver of advisory and administration fees, and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been ____%, 1.12%, 1.14%, 1.17%, 1.16%, 1.19%, 1.20%, 1.17% and 1.16% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively, and 1.27% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Bedford Class of shares within the Portfolio.
THE BEDFORD FAMILY
THE RBB FUND, INC. FINANCIAL HIGHLIGHTS (C)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
MUNICIPAL MONEY MARKET PORTFOLIO
-------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1998 1997 1996 1995 1994 1993
-------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income.......... 0.0285 0.0288 0.0297 0.0195 0.0195
Net gains on securities (both
realized and unrealized)..... -- -- -- -- --
-------- -------- -------- -------- --------
Total from investment
operations............... 0.0285 0.0288 0.0297 0.0195 0.0195
------ ------ ------ ------ ------
Less distributions
Dividends (from net investment
income)...................... (0.0285) (0.0288) (0.0297) (0.0195) (0.0195)
Distributions (from capital
gains)....................... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions........ (0.0285) (0.0288) (0.0297) (0.0195) (0.0195)
------- ------- ------ ------ ------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return..................... 2.88% 2.92% 3.01% 1.97% 1.96%
Ratios/Supplemental Data
Net assets, end of period (000) $213,034 $201,940 $198,425 $182,480 $215,577
Ratios of expenses to average
net assets................... .85%(a) .84%(a) .82%(a) .77%(a) .77%(a)
Ratios of net investment income to
average net assets........... 2.85% 2.88% 2.97% 1.95% 1.95%
|
---------------------------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 30, 1988
FOR THE FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED YEAR ENDED OPERATIONS)
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1992 1991 1990 1989
---------------------------------------------------------------------------------------------------
Net asset value,
beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- --------- ---------
Income from investment operations:
Net investment income.......... 0.0287 0.0431 0.0522 0.0513
Net gains on securities (both
realized and unrealized)..... -- -- -- --
-------- -------- ---------- ----------
Total from investment
operations............... 0.0287 0.0431 0.0522 0.0513
------ ------ ------- -------
Less distributions
Dividends (from net investment
income)...................... (0.0287) (0.0431) (0.0522) (0.0513)
Distributions (from capital
gains)....................... -- -- -- --
-------- -------- ---------- ----------
Total distributions........ (0.0287) (0.0431) (0.0522) (0.0513)
------ ------ ------- -------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========= =========
Total return..................... 2.90% 4.40% 5.35% 5.72%(b)
Ratios/Supplemental Data
Net assets, end of period (000) $176,950 $215,140 $195,566 $85,806
Ratios of expenses to average
net assets................... .77%(a) .74%(a) .75%(a) .33%(a)(b)
Ratios of net investment income to
average net assets........... 2.87% 4.31% 5.22% 5.70%(b)
|
(a) Without the waiver of advisory and administration fees, and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Municipal Money Market Portfolio would have been ___%, 1.14%, 1.12%, 1.14%, 1.12%,1.16%, 1.15%, 1.13% and 1.14% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively, and 1.27% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Bedford Class of shares within the Portfolio.
THE BEDFORD FAMILY
THE RBB FUND, INC. FINANCIAL HIGHLIGHTS (C)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
-------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1998 1997 1996 1995 1994 1993
-------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income.......... 0.0449 0.0458 0.0475 0.0270 0.0231
Net gains on securities (both
realized and unrealized)..... -- -- -- -- --
-------- -------- -------- -------- --------
Total from investment
operations............... 0.0449 0.0458 0.0475 0.0270 0.0231
------ ------ ------ ------ ------
Less distributions
Dividends (from net investment
income)...................... (0.0449) (0.0458) (0.0475) (0.0270) (0.0231)
Distributions (from capital
gains)....................... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions........ (0.0449) (0.0458) (0.0475) (0.0270) (0.0231)
------- ------- ------ ------ ------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return..................... 4.59% 4.68% 4.86% 2.73% 2.33%
Ratios/Supplemental Data
Net assets, end of period (000) $209,715 $192,599 $163,398 $166,418 $213,741
Ratios of expenses to average
net assets................... .975%(a) .975%(a) .975%(a) .975%(a) .975%(a)
Ratios of net investment income to
average net assets........... 4.49% 4.58% 4.75% 2.70% 2.31%
|
---------------------------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 30, 1988
FOR THE FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED YEAR ENDED OPERATIONS)
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1992 1991 1990 1989
---------------------------------------------------------------------------------------------------
Net asset value,
beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- --------- ---------
Income from investment operations:
Net investment income.......... 0.0375 0.0604 0.0748 0.0725
Net gains on securities (both
realized and unrealized)..... 0.0009 -- -- --
-------- -------- ---------- ----------
Total from investment
operations............... (0.0384) (0.0604) (0.0748) (0.0725)
------ ------ ------- -------
Less distributions
Dividends (from net investment
income)...................... (0.0375) (0.0604) (0.0748) (0.0725)
Distributions (from capital
gains)....................... 0.0009 -- -- --
-------- -------- ---------- ----------
Total distributions........ (0.0384) (0.0604) (0.0748) (0.0725)
------ ------ ------- -------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========= =========
Total return..................... 3.91% 6.21% 7.74% 8.64%(b)
Ratios/Supplemental Data
Net assets, end of period (000) $225,101 $368,899 $209,378 $66,281
Ratios of expenses to average
net assets................... .975(a)% .95(a)% .95(a)% .96%(a)(b)
Ratios of net investment income to
average net assets........... 3.75% 6.04% 7.48% 8.34% (b)
|
(a) Without the waiver of advisory fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Government Obligations Money Market Portfolio would have been ____%, 1.09%, 1.10%, 1.13%, 1.17%, 1.18%, 1.12%, 1.13% and 1.17% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993,1992, 1991 and 1990, respectively, and 1.40% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Bedford Class of shares within the Portfolio.
MONEY MARKET PORTFOLIO
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." There is no assurance that the Portfolio will achieve its investment objective. The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests.
BANK OBLIGATIONS. The Portfolio may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
COMMERCIAL PAPER. The Portfolio may purchase commercial paper rated (i) (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
VARIABLE RATE DEMAND NOTES. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate.
Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. GOVERNMENT OBLIGATIONS. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
ASSET-BACKED SECURITIES. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a Portfolio will generally be at lower rates than the rates on the prepaid obligations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a Portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase
agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
GUARANTEED INVESTMENT CONTRACTS. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively, "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
MUNICIPAL OBLIGATIONS. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies -Municipal Money Market Portfolio -- Municipal Obligations."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
WHEN-ISSUED SECURITIES. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
ELIGIBLE SECURITIES. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two highest rating categories by at least two Rating Organizations ("Rating Organizations") (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain
cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
MUNICIPAL MONEY MARKET PORTFOLIO
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities, the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Portfolio will be achieved.
MUNICIPAL OBLIGATIONS. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of
assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations whose issuers are in the same state, (ii) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects or are issued by issuers located in the same state, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated.
TAX-EXEMPT DERIVATIVE SECURITIES. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
WHEN-ISSUED SECURITIES. The Portfolio may also purchase portfolio securities on a "when-issued" basis as described under "Investment Objectives and Policies -- Money Market Portfolio -- When-Issued Securities."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio as described under "Investment Objectives and Policies -- Money Market Portfolio -- Stand-By Commitments."
ELIGIBLE SECURITIES. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities as described under "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury, others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal. There is no assurance that the investment objective of the Portfolio will be achieved.
Due to fluctuations in interest rates, the market values of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments
are sufficient to cause the securities to have market values, after adjustment, which approximate their par values.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase government securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). For a more complete description of repurchase agreements, see "Investment Objectives and Policies -- Money Market Portfolio -- Repurchase Agreements."
REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions and to meet redemptions. For a more complete description of reverse repurchase agreements, see "Investment Objectives and Policies -- Money Market Portfolio -- Reverse Repurchase Agreements."
MORTGAGE-RELATED AND ASSET-BACKED SECURITIES. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself. The Fund may also acquire asset-backed securities as described under "Investment Objectives and Policies -- Money Market Portfolio -- Asset Backed Securities."
LENDING OF SECURITIES. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities as described under "Investment Objectives and Policies--Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund
that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
The Money Market, Municipal Money Market and Government Obligations Money Market Portfolios' respective investment objectives and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolios may not, however, change the following investment limitations (except as noted) without such a vote of their respective shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Portfolios may not borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings in excess of 5% of the Portfolio's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of a Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
The Money Market and Municipal Money Market Portfolios may not:
1. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by a Portfolio, except that up to 25% of the value of a Portfolio's total assets may be invested without regard to such 5% limitation.
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government securities,
to 5% of its total assets, except that the Money Market Portfolio may invest
more than 5% of its total assets in First Tier Securities of one issuer for a
period of up to three Business Days (as defined below). "First Tier Securities"
include eligible securities that (i) if rated by more than one Rating
Organization, are rated (at the time of purchase) by two or more Rating
Organizations in the highest rating category for such securities, (ii) if rated
by only one Rating Organization, are rated by such Rating Organization in its
highest rating category for such securities, (iii) have no short-term rating and
are comparable in priority and security to a class of short-term obligations of
the issuer of such securities that have been rated in accordance with (i) or
(ii) above, or (iv) are Unrated Securities that are determined to be of
comparable quality to such securities. Purchases of First Tier Securities that
come within categories (ii) and (iv) above will be approved or ratified by the
Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
The Municipal Money Market Portfolio may not:
1. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in obligations at the time of purchase to be invested in issuers in the same industry.
In addition, without shareholder approval, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
PURCHASE PROCEDURES
GENERAL. Bedford Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania. Investors may purchase Bedford Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Bedford Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by the Fund by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by PFPC after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the closed of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment
has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
PURCHASES THROUGH AN ACCOUNT. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Bedford Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Bedford Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker. Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Bedford Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares of the Bedford Class designated by the investor as the "Primary Bedford Class" for his Purchase Program. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker. A participant in a Purchase Program may change the designation of the Primary Bedford Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Bedford Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made in available Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
DIRECT PURCHASES. An investor may also make direct investments at any time in any Bedford Class he selects through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment in any of the Bedford Classes by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Portfolio in which he wishes to invest, and mailing it, together with a check payable to "The Bedford Family" to the Bedford Family, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The check must specify the name of the Portfolio for which shares are being purchased. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares in any of the Bedford Classes by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800)533-7719 (in Delaware call collect (302) 791-1196), and provide your name, address, telephone number, Social Security or Tax Identification Number, the Bedford Class selected, the amount being wired, and by which bank or Dealer. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, PA
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of the Portfolio) AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
RETIREMENT PLANS. Bedford Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
REDEMPTION PROCEDURES
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
REDEMPTION OF SHARES IN AN ACCOUNT. An investor who beneficially owns Bedford Shares through an Account may redeem Bedford Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after
12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares of the Primary Bedford Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
REDEMPTION OF SHARES OWNED DIRECTLY. A direct investor may redeem any number of Shares by sending a written request to The Bedford Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by call (888) 261-4073. Neither the Fund, the Distributor, the Portfolios, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than the Distributor), financial institutions, securities dealers, financial planners or other industry professionals, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization Form that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next day that a wire transfer can be effected. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
REDEMPTION BY CHECK. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
ADDITIONAL REDEMPTION INFORMATION. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares
using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in a Bedford Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the proportionate interest of each class in the value of the securities, cash and other assets of the Portfolio, subtracting the accrued and actual liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of the Fund is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
BOARD OF DIRECTORS
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen investment portfolios. Each of the Bedford Classes represents interests in one of the following portfolios: the
Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio.
INVESTMENT ADVISER
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreements between BIMC and RBB, with respect to the Money Market and Government Obligations Money Market Portfolios, respectively, provide for BIMC to also assist generally in supervising the operations of such Portfolios, and to maintain such Portfolio's financial accounts and records. These administrative responsibilities have been delegated to PFPC as described below.
For the services provided to and expenses assumed by it for the benefit of each of the Money Market and Government Obligations Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the services provided and expenses assumed by it with respect to the Municipal Money Market Portfolio, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
For the Fund's fiscal year ended August 31, 1998, the Fund paid investment advisory fees aggregating ____% of the average net assets of the Money Market Portfolio, ____% of the average net assets of the Municipal Money Market Portfolio and ____% of the average net assets of the Government Obligations Money Market Portfolio. For that same year, BIMC waived approximately ____%, ____% and ____% of average net assets of the Money Market Portfolio, Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio, respectively.
PNC Bank was formerly sub-adviser to the Money Market, Municipal Money Market and Government Obligations Portfolios and provided research, credit analysis and recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by such Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company".
ADMINISTRATOR
PFPC serves as the administrator for the Municipal Money Market Portfolio and generally assists the Portfolio in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of the Portfolio. Pursuant to its advisory agreements with the Fund with respect to the Money Market and Government Obligations Money Market Portfolios, BIMC provides administrative services to such Portfolios pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreements. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market and Government Obligations Money Market Portfolios which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolios to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND CUSTODIAN
PNC Bank serves as the Fund's custodian and PFPC, an indirect wholly owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with Dealers for the provision of certain shareholder support services to customers of such Dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
DISTRIBUTOR
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as Distributor of the Shares of each of the Bedford Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
EXPENSES
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. The Bedford Classes of the Fund pay their own distribution fees and may pay a different share than 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 Bedford Class or if they receive different services.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of lowering yield to investors.
For the Fund's fiscal year ended August 31, 1998, the Fund's total expenses were _____% of the average net assets with respect to the Bedford Class of the Money Market Portfolio (not taking into account waivers of ___%), were ____% of the average net assets with respect to the Bedford Class of the Municipal Money Market Portfolio (not taking into account waivers of ___%) and were ____% of the average net assets with respect to the Bedford Class of the Government Obligations Money Market Portfolio (not taking into account waivers of ___%).
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Bedford Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Bedford Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net assets of the relevant Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Bedford Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including broker/dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse broker/dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or broker/dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Bedford Class the fee agreed to under the Distribution Agreement. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Bedford Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of trading of the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Money Market Portfolio and the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolio's investments, that a portion of the Portfolio's distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market, Municipal Money Market and Government Obligations Money Market Portfolios to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement entered into with the Distributor and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BEDFORD CLASSES OF THE MONEY MARKET, MUNICIPAL MONEY MARKET AND GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE BEDFORD CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ____________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all of the classes of the Fund.
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
CONTENTS
PAGE
INTRODUCTION.................................
FINANCIAL HIGHLIGHTS.........................
INVESTMENT OBJECTIVES AND POLICIES........... YEAR 2000.................................... INVESTMENT LIMITATIONS....................... PURCHASE AND REDEMPTION OF SHARES............
NET ASSET VALUE..............................
MANAGEMENT................................... DISTRIBUTION OF SHARES.......................
DIVIDENDS AND DISTRIBUTIONS.................. TAXES........................................ DESCRIPTION OF SHARES........................ OTHER INFORMATION............................
INVESTMENT ADVISER
BlackRock Institutional Management Corporation
Wilmington, Delaware
DISTRIBUTOR
Provident Distributors, Inc.
Conshohocken, Pennsylvania
CUSTODIAN
PNC Bank, National Association
Philadelphia, Pennsylvania
ADMINISTRATOR AND TRANSFER AGENT
PFPC Inc.
Wilmington, Delaware
COUNSEL
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
OF
THE RBB FUND, INC.
MONEY MARKET PORTFOLIO
AND
MUNICIPAL MONEY
MARKET PORTFOLIO
Prospectus
December __, 1998
CASH PRESERVATION PORTFOLIOS
OF
THE RBB FUND, INC.
The Cash Preservation Portfolios consist of two classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company. The shares of the Cash Preservation Classes offered by this Prospectus represent interests in a taxable money market portfolio and a municipal money market portfolio. The investment objectives of each investment portfolio described in this Prospectus are as follows:
MONEY MARKET PORTFOLIO - to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
MUNICIPAL MONEY MARKET PORTFOLIO - to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIOS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
BlackRock Institutional Management Corporation serves as investment adviser for these Portfolios and PNC Bank, National Association serves as custodian for the Fund. PFPC Inc. serves as administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the SEC Internet Website (http://www.sec.gov).
PROSPECTUS December __, 1998
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. Each of the two classes (collectively, the "Cash Preservation Classes") of the Fund's shares ("Cash Preservation Shares" or "Shares") offered by this Prospectus represents interests in one of the following of such investment portfolios: the Money Market Portfolio and the Municipal Money Market Portfolio (together, the "Portfolios").
The MONEY MARKET PORTFOLIO'S investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of U.S. dollar denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets.
The MUNICIPAL MONEY MARKET PORTFOLIO'S investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is Blackrock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund, and PFPC Inc. ("PFPC") serves as the administrator to the Portfolios and the transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase Shares of either of the Cash Preservation Classes by mail, bank wire or by payment from insurance policies. An investor may redeem Shares of either of the Cash Preservation Classes by mail, Fund check, or by telephone. For more detailed information of how to purchase or redeem Cash Preservation Shares, please refer to the section of this Prospectus entitled "Purchase and Redemption of Shares."
An investment in either of the Cash Preservation Classes is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Either or both of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of securities on a "when-issued" or "forward commitment" basis and the purchase of stand-by commitments. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
The Fee Table below contains a summary of the annual operating expenses of the Cash Preservation Classes of the Portfolios based on expenses incurred for the fiscal year ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
ANNUAL FUND OPERATING EXPENSES (CASH PRESERVATION CLASSES) AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
MUNICIPAL
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
Management Fees (after waivers)(1).......... . __% . __%
12b-1 Fees(1)............................... . __ . __
Other Expenses (after waivers)(1)........... . __ . __
Total Fund Operating Expenses
(Cash Preservation Classes) (after
waivers)(1)............................... . % . %
====== ======
|
(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio and Municipal Money Market Portfolio, Management Fees would be ___% and ___%, respectively, Other Expenses would be ____% and _____%, respectively, and Total Fund Operating Expenses would be _____% and _____% respectively.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Money Market*................... $ $ $ $
Municipal Money Market*......... $ $ $ $
|
*Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Cash Preservation Classes)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Cash Preservation Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management--Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on actual costs and fees charged to each class. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. In addition, the investment adviser is currently voluntarily assuming additional expenses of the Portfolios. There can be no assurance that the investment adviser will continue to assume such expenses. Assumption of additional expenses will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. The Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing such Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of either of the Cash Preservation Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in the Cash Preservation Classes are not reflected in the total return and yields of the Cash Preservation Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Cash Preservation Classes may differ from the total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio.
The table below sets forth certain information concerning the investment results of the Cash Preservation Classes representing interests in the Money Market and Municipal Money Market Portfolios for the periods indicated. The financial data included in this table for each of the periods
ended August 31, 1994 through August 31, 1998 are part of the Fund's financial statements for each of the Portfolios, which have been incorporated by reference into the Statement of Additional Information and have been audited by _______________________________________________________, the Fund's independent accountants. The financial data for each of the Portfolios for the periods ended August 31, 1989, 1990, 1991, 1992 and 1993 are a part of previous financial statements audited by ______________________. The financial data should be read in conjunction with the financial statements and notes thereto. Further information about the performance of the Portfolios is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained free of charge by calling the telephone number on page 1 of this Prospectus.
CASH PRESERVATION CLASSES
CASH PRESERVATION FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS (C)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
MONEY MARKET PORTFOLIO
----------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1998 1997 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------------
Net asset value,
beginning of period........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ------
Income from investment operations:
Net investment income 0.0464 0.0471 0.0487 0.0278 0.0243 0.0375
Net gains on securities
(both realized and unrealized) -- -- -- -- -- 0.0007
------- -------- -------- -------- ------- -------
Total from
investment operations. 0.0464 0.0471 0.0487 0.0278 0.0243 0.0382
------- -------- -------- -------- ------- -------
Less distributions
Dividends (from net investment
income) (0.0464) (0.0471) (0.0487) (0.0278) (0.0243) (0.0375)
Distributions
(from capital gains).......... -- -- -- -- -- (0.0007)
------- -------- -------- -------- ------- --------
Total distributions (0.0464) (0.0471) (0.0487) (0.0278) (0.0243) (0.0382)
------- -------- -------- -------- ------- --------
Net asset value, end of period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total return....... 4.74% 4.81% 4.98% 2.81% 2.46% 3.89%
Ratios/Supplemental Data
Net assets, end of period (000) $ 242 $ 202 $ 236 $ 231 $ 1,229 $ 1,233
Ratios of expenses to
average net assets.......... .95%(a) .95%(a) .95%(a) .95%(a) 95%(a) .95%(a)
Ratios of net investment income
to average net assets 4.64% 4.71% 4.87% 2.78% 2.43% 3.75%
|
---------------------------------------------
FOR THE PERIOD
SEPTEMBER 30, 1988
FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO
AUGUST 31, AUGUST 31, AUGUST 31,
1991 1990 1989
---------------------------------------------
Net asset value,
beginning of period........... $1.00 $1.00 $1.00
----- ----- -----
Income from investment operations:
Net investment income 0.0626 0.0763 0.0780
Net gains on securities
(both realized and unrealized) -- -- --
------- ------- -------
Total from
investment operations. 0.0626 0.0763 0.0780
------- ------- -------
Less distributions
Dividends (from net investment
income) (0.0626) (0.0763) (0.0780)
Distributions
(from capital gains).......... -- -- --
-------- ------- -------
Total distributions (0.0626) (0.0763) (0.0780)
-------- ------- -------
Net asset value, end of period.... $1.00 $1.00 $1.00
===== ===== =====
Total return....... 6.45% 7.90% 8.81%(b)
Ratios/Supplemental Data
Net assets, end of period (000) $ 1,412 $ 1,799 $ 2,213
Ratios of expenses to
average net assets.......... .95%(a) .94%(a) .95%(a)(b)
Ratios of net investment income
to average net assets 6.26% 7.63% 8.59%(b)
|
(a) Without the waiver of advisory and transfer agency fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been _______%, 10.68%, 12.08%, 9.34%, 2.52%, 2.25%, 2.30%, 2.13% and 1.69% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively, and 1.59% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Cash Preservation Class of Shares within the Portfolio.
CASH PRESERVATION CLASSES
CASH PRESERVATION FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS (C)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
MUNICIPAL MONEY MARKET PORTFOLIO
----------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1998 1997 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------------
Net asset value,
beginning of period........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ------
Income from investment operations:
Net investment income 0.0272 0.0274 0.0281 0.0174 0.0174 0.0266
Net gains on securities
(both realized and unrealized) -- -- -- -- -- --
------- -------- -------- -------- ------- -------
Total from
investment operations. 0.0272 0.0274 0.0281 0.0174 0.0174 0.0266
------- -------- -------- -------- ------- -------
Less distributions
Dividends (from net investment
income) (0.0272) (0.0274) (0.0281) (0.0174) (0.0174) (0.0266)
Distributions
(from capital gains).......... -- -- -- -- -- --
------- -------- -------- -------- ------- --------
Total distributions (0.0272) (0.0274) (0.0281) (0.0174) (0.0174) (0.0266)
------- -------- -------- -------- ------- --------
Net asset value, end of period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total return....... 2.76% 2.78% 2.84% 1.75% 1.75% 2.69%
Ratios/Supplemental Data
Net assets, end of period (000) $ 97 $ 116 $ 161 $ 201 $ 157 $ 214
Ratios of expenses to
average net assets.......... .98%(a) .98%(a) .98%(a) .98%(a) 98%(a) .98%(a)
Ratios of net investment income
to average net assets 2.72% 2.74% 2.81% 1.74% 1.74% 2.66%
|
---------------------------------------------
FOR THE PERIOD
SEPTEMBER 30, 1988
FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO
AUGUST 31, AUGUST 31, AUGUST 31,
1991 1990 1989
---------------------------------------------
Net asset value,
beginning of period........... $1.00 $1.00 $1.00
----- ----- -----
Income from investment operations:
Net investment income 0.0408 0.0499 0.0497
Net gains on securities
(both realized and unrealized) -- -- --
------- ------- -------
Total from
investment operations. 0.0408 0.0499 0.0497
------- ------- -------
Less distributions
Dividends (from net investment
income) (0.0408) (0.0499) (0.0497)
Distributions
(from capital gains).......... -- -- --
-------- ------- -------
Total distributions (0.0408) (0.0499) (0.0497)
-------- ------- -------
Net asset value, end of period.... $1.00 $1.00 $1.00
===== ===== =====
Total return....... 4.16% 5.11% 5.53%(b)
Ratios/Supplemental Data
Net assets, end of period (000) $ 281 $ 236 $ 36
Ratios of expenses to
average net assets.......... .97%(a) .98%(a) .94%(a)(b)
Ratios of net investment income
to average net assets 4.08% 4.99% 5.49%(b)
|
(a) Without the waiver of advisory, administration and transfer agency fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Municipal Money Market Portfolio would have been _____% 26.58%, 19.20%, 10.80%, 11.52%, 8.95%, 5.91%, 5.59% and 15.08% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively, and 51.02% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Cash Preservation Class of Shares within the Portfolio.
MONEY MARKET PORTFOLIO
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." There is no assurance that the Portfolio will achieve its investment objective. The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests.
BANK OBLIGATIONS. The Portfolio may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
COMMERCIAL PAPER. The Portfolio may purchase commercial paper rated (i) (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organizations") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
VARIABLE RATE DEMAND NOTES. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate.
Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. GOVERNMENT OBLIGATIONS. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
ASSET-BACKED SECURITIES. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a Portfolio will generally be at lower rates than the rates on the prepaid obligations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a Portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the
market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
GUARANTEED INVESTMENT CONTRACTS. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively, "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
MUNICIPAL OBLIGATIONS. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Municipal Obligations."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
WHEN-ISSUED SECURITIES. The Portfolio may purchase portfolio securities on a "when-issued" basis. When issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
ELIGIBLE SECURITIES. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two highest rating categories by at least twoRating Organizations (e.g., commercial paper rated
"A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P")), (3) securities
that are rated at the time of purchase by the only Rating Organization rating
the security in one of its two highest rating categories for such securities,
(4) securities issued by issuers (or, in certain cases guaranteed by persons)
with short-term debt having such ratings, and (5) securities that are not rated
and are issued by an issuer that does not have comparable obligations rated by a
Rating Organization ("Unrated Securities"), provided that such securities are
determined to be of comparable quality to eligible rated securities. For a more
complete description of eligible securities, see "Investment Objectives and
Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
MUNICIPAL MONEY MARKET PORTFOLIO
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest").There is no assurance that the investment objective of the Portfolio will be achieved.
MUNICIPAL OBLIGATIONS. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source, such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations whose issuers are in the same state, (ii) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects or are issued by issuers located in the same state, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated.
TAX-EXEMPT DERIVATIVE SECURITIES. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the
proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
WHEN-ISSUED SECURITIES. The Portfolio may also purchase portfolio securities on a "when-issued" basis as described under "Investment Objectives and Policies--Money Market Portfolio --When-Issued Securities."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
ELIGIBLE SECURITIES. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies--Money Market Portfolio--Eligible Securities" and "Investment Objectives and Policies in the Statement of Additional Information."
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies--Money Market Portfolio--Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
The Money Market and Municipal Money Market Portfolios' investment objectives and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolios may not, however, change the following investment limitations (except as noted) without such a vote of their respective shareholders. (A more detailed description of the following
investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Portfolios may not:
1. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by a Portfolio, except that up to 25% of the value of a Portfolio's total assets may be invested without regard to such 5% limitation.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements and then in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of a Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowing in excess of 5% of a Portfolio's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of a Portfolio's securities by enabling a Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
The Money Market Portfolio may not
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total
assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization, are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
The Municipal Money Market Portfolio may not:
1. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested at the time of purchase in obligations of issuers in the same industry.
In addition, without shareholder approval, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
PURCHASE PROCEDURES
Cash Preservation Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania. Investors may purchase Cash Preservation Shares by mail, wire or exchange from another Cash Preservation Class as described below. The minimum initial investment in each Portfolio is $1,000. Subsequent investments must be at least $100 ($1,000 if the investment is transmitted by wire). The Fund reserves the right to reject any purchase order.
Shareholders whose shares are held in the street name account of a broker/dealer and who desire to transfer such shares to the street name account of another broker/dealer should contact their current broker/dealer.
Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by the Fund by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time) and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
INITIAL INVESTMENT
BY MAIL - You may purchase Shares in either of the Cash Preservation Classes by mail by completing and signing the attached application (the "Application"), specifying the Portfolio in which you wish to invest, and mailing it, together with a check payable to the order of "Cash Preservation" to Cash Preservation Portfolios, c/o PFPC, P.O. Box 8916, Wilmington, Delaware 19899. The check must also specify the name of the Portfolio in which you wish to invest. An Application will be returned to an investor unless it contains the name of the Authorized Dealer from whom it was obtained.
BY BANK WIRE - You may purchase Shares in either of the Cash Preservation Classes by having your bank wire Federal Funds to the Fund's custodian, PNC Bank. Your bank may impose a charge for this service. The Fund currently does not charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of your Federal Funds wire, it is important that you follow these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 430-9618 and provide your name, address, telephone number, Social Security or Tax Identification Number, the Cash Preservation Class selected, the amount being wired, and by which bank. PFPC will then provide you with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank to wire the specified amount, together with your assigned account number, to the custodian:
PNC Bank, N.A., Philadelphia, Pa.
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of the Portfolio) AMOUNT: (amount to be invested)
C. Complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application. An Application will be returned to an investor unless it contains the name of the Authorized Dealer (a dealer who has entered into a dealer agreement with the Distributor) from whom it was obtained generally.
Federal Funds must be received by PFPC by 12:00 noon Eastern Time for it to process an order as of 12:00 noon on such day. Federal Funds received after 12:00 noon but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time) on a Business Day will be processed as of the close of regular trading on the NYSE on that Business Day but the Shares acquired will not be entitled to receive dividends declared on such Business Day. Federal Funds received after the close of regular trading on the NYSE on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
BY PAYMENT FROM INSURANCE POLICIES - If you are a recipient of certain insurance policy payments, you may purchase Shares by completing and signing an Application, including the section which authorizes your insurance company to forward policy payments to the Cash Preservation Class indicated on the Application, and mailing it to PFPC at the address shown thereon. An Application will be returned to an investor unless it contains the name of the Authorized Dealer from whom it was obtained.
Cash Preservation Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or an Authorized Dealer. To determine whether the benefits of an IRA are available and/or appropriate, an investor should consult with a tax adviser.
SUBSEQUENT INVESTMENTS
Once an account has been opened, additional investments may be made by mail, wire, exchange, or the automatic investment program. The minimum subsequent investment is $100 ($1,000 if payment is by wire).
BY MAIL - Payment may be made by check or a Federal Reserve Draft payable to the order of "Cash Preservation." The check or draft must also specify the name of the Portfolio in which you wish to invest. Mail your payment to Cash Preservation c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System.
BY BANK WIRE - Follow steps A and B above given under "Initial Investment - By Bank Wire."
BY EXCHANGE - Follow the procedures given under "Redemption and Exchange of Shares -- Exchange Privilege" below.
BY AUTOMATIC INVESTING - Additional investments may be made automatically by authorizing PFPC to withdraw funds from your bank account. Investors desiring to participate in the automatic investing program should call PFPC at (800) 430-9618 to obtain the appropriate form.
REDEMPTION AND EXCHANGE OF SHARES
Redemption orders are effected at the net asset value per Share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
BY MAIL - An investor may redeem any number of Shares by sending a written request, together with any share certificates issued to the investor, to the Fund's transfer agent, PFPC, P.O. Box 8916, Wilmington, Delaware 19899 Attention: Cash Preservation Portfolios. It is recommended that such request be sent by registered or certified mail if share certificates accompany the request. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed according to the procedures described below under "Exchange Privilege."
BY FUND CHECK - An investor may request that the Fund provide redemption checks drawn on a particular Cash Preservation Class. SHAREHOLDERS HOLDING SHARE CERTIFICATES ARE NOT ELIGIBLE FOR THIS CHECK WRITING PRIVILEGE BECAUSE SHARE CERTIFICATES MUST ACCOMPANY ALL REDEMPTION REQUESTS. Checks will be sent only to the registered owner(s) and only to the address of record. Investors may issue checks made payable to the order of any person in the amount of $100 or more. The redemption is not effective until the check is processed and cleared by the transfer agent, and dividends are earned until the redemption is effected. Because dividends accrue daily, a check should not be used to close an account as a small balance is likely to result. There is no charge to the investor for redemption by check. If a shareholder who has check writing privileges exchanges funds from one Cash Preservation Class into another Cash Preservation Class, he or she will automatically receive a checkbook for the new account (allow three to four weeks for delivery). The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
PAYMENT OF REDEMPTION PROCEEDS
Redemption proceeds will be mailed by check to your registered address unless you have designated in your Application or Telephone Authorization Form
that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next day that a wire transfer can be effected. The minimum redemption for proceeds sent by wire transfer is $1,000. There is no maximum redemption for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders. No fee is currently contemplated.
ADDITIONAL REDEMPTION INFORMATION
The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by the Fund's transfer agent of a request in proper form. However, Shares purchased by check will not be redeemed for a period up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. During the period prior to the time the Shares are redeemed, dividends on such Shares will accrue and be payable, and an investor will be entitled to exercise all other rights of beneficial ownership.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in a Cash Preservation Class involuntarily, on thirty days' notice, if such account drops below $500 and during such 30-day period the shareholder does not increase such account to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
Shareholders who wish to exchange Shares of one Cash Preservation Class for another Cash Preservation Class may do so by mail or by telephone. In addition to exchanges between Cash Preservation Classes, shareholders may exchange Shares of a Cash Preservation Class for shares of the RBB Class of the Government Securities Portfolio (the "Participating Class") by mail or telephone provided they have completed the appropriate section of the Application beforehand. Shares of the Participating Class may be acquired by exchange at the next determined public offering price, including sales charges, if any, applicable to such shares. In order to establish a systematic withdrawal plan for the new account, an exchanging shareholder must file a written request. The Fund and PFPC reserve the right to limit, amend or terminate these exchange privileges at any time upon 60 days written notice to shareholders. No exchange fee is currently imposed for exchanges; however, the Fund reserves the right to charge shareholders an exchange fee of $5.00 for each exchange. In the case of shareholders holding share certificates, the certificates must accompany the request for an exchange. An exchange of Shares will be treated as a sale for federal tax purposes.
DETAILED INSTRUCTIONS REQUIRED. A request for an exchange of Shares must be sufficiently detailed to enable PFPC to complete the exchange in accordance with the shareholder's wishes. The request must name the Portfolio and account number from which the exchange is to be made. It must also name the Portfolio to which the exchange is to be made and the account number, if to an
existing account. The request must specify the amount of money or Shares to be exchanged. New accounts will be established with the same registration and address, and with the same options as the account from which the exchange is made -- an Application is not needed. If the registration or address of the new account is to be different in any respect, the request must be in writing with all signatures guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings associations who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are the Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
EXCHANGE BY MAIL - Send a written request (together with any share certificates issued to the investor) to: Cash Preservation c/o PFPC, P.O. Box 8916, Wilmington, Delaware 19899. The request must be signed by all shareholders exactly as their names appear on the Fund's records.
ACCOUNT MINIMUMS. If the exchange is to a new account, the dollar value of Shares acquired must equal or exceed the Portfolio's minimum for a new account; if to an existing account, the dollar value must equal or exceed the Portfolio's minimum for subsequent investments. If any amount remains in the Cash Preservation Class from which the exchange is being made, such amount must not drop below the minimum account value required by that Portfolio.
TELEPHONE TRANSACTIONS
Shareholders are automatically provided with this option when opening an account, unless they indicate on the Application that they do not wish to use this privilege. SHAREHOLDERS HOLDING SHARE CERTIFICATES MAY NOT REDEEM OR EXCHANGE SHARES BY TELEPHONE BECAUSE SHARE CERTIFICATES MUST ACCOMPANY ALL EXCHANGE AND REDEMPTION REQUESTS. To add this feature to an existing account that previously did not provide for this option, a Telephone Exchange Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption or exchange by calling (800) 430-9618. Neither the Fund, the Portfolios, the Distributor, PFPC nor any other Fund Agent, will be liable for any loss, liability, cost or expense for following the Fund's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) permitting exchanges only if the two account registrations are
identical; (5) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (6) sending a written confirmation for
each telephone transaction to the owners of record at the address of record within five (5) business days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Fund elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than the Distributor), financial institutions, securities dealers, financial planners or other industry professionals, trustee, custodian or other agent, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by attorney-in-fact under power of attorney.
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE, is closed on weekends and the customary national business holidays of 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed, as well as Veterans' Day and Columbus Day. The net asset value per share of each class of a Portfolio is calculated by adding the value of the proportionate interest of the class in the Portfolio's securities, cash and other assets, deducting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of the Fund is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
BOARD OF DIRECTORS
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. Each of the Cash Preservation Classes represents interests in one of the following such investment portfolios: the Money Market Portfolio and the Municipal Money Market Portfolio.
INVESTMENT ADVISER
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware, 19809. PNC Bank and its subsidiaries currently manage over $___ billion of assets, of which approximately $___ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreement between BIMC and RBB, with respect to the Money Market Portfolio, provides for BIMC to also assist generally in supervising the operations of such Portfolio, and to maintain the Portfolio's financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it with respect to the Money Market Portfolio, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million. For the services provided to and expenses assumed by it with respect to the Municipal Money Market Portfolio, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million. BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
For the Fund's fiscal year ended August 31, 1998, the Fund paid investment advisory fees aggregating__% and __% of the average net assets of the Money Market Portfolio and the Municipal Money Market Portfolio, respectively. For that same period, BIMC waived approximately __% and __% of the average net assets of the Money Market Portfolio and the Municipal Money Market Portfolio, respectively.
PNC Bank was formerly sub-adviser to the Portfolios and provided research, credit analysis and recommendations with respect to the Portfolios' investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by the Portfolios to BIMC. The sub-advisory fees paid by BIMC to PNC Bank had no effect on the services provided by BIMC and the fees payable by the Portfolios for these services are described further in the Statement of Additional Information under "Management of the Company."
ADMINISTRATOR
PFPC serves as the administrator for the Municipal Money Market Portfolio and generally assists such Portfolio in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of average daily net assets of the Municipal Money Market Portfolio. Pursuant to its advisory agreement with the Fund with respect to the Money Market Portfolio, BIMC provides administrative services to such Portfolio pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreement. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market Portfolio which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolio to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND CUSTODIAN
PNC Bank serves as the Fund's custodian and PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support services to customers of such broker/dealers who are shareholders of the
Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
DISTRIBUTOR
Provident Distributors, Inc. (the "Distributor"), with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor of the Shares of each of the Cash Preservation Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
EXPENSES
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based on the relative net assets of the investment portfolios at the time such expenses were accrued. The Cash Preservation Classes of the Fund pay their own distribution fees, and may pay a different share than other classes of the Fund of other expenses (excluding advisory and custodial fees) if these expenses are actually incurred in a different amount by the Cash Preservation Classes or if they receive different services.
The investment adviser may assume additional expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of lowering yield to investors.
For the Fund's fiscal year ended August 31, 1998 the Fund's total expenses were _____% of the average daily net assets with respect to the Cash Preservation Class of the Money Market Portfolio (not taking into account waivers and reimbursements of ___%) and were ___% of the average daily net assets with respect to the Cash Preservation Class of the Municipal Money Market Portfolio (not taking into account waivers and reimbursements of ___%).
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Cash Preservation Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Cash Preservation Class. The actual amount of such compensation under the Plans is agreed upon by the Fund's Board of Directors and by the Distributor. Under each of the Distribution Agreement, the Distributor
has agreed to accept compensation for its services thereunder and under the relevant Plan in the amount of .40% on an annualized basis of the average daily net assets of the relevant Cash Preservation Class in any year. Such compensation may be increased, up to the amount permitted in the Plan, with the approval of the Fund's Board of Directors. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission (the "SEC"), the Distributor has agreed to waive its fee with respect to a Cash Preservation Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including to Authorized Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Authorized Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Authorized Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Cash Preservation Class the fee agreed to under the Distribution Agreement. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Cash Preservation Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolio's investments, that a portion of the Portfolio's distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified into __ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market Portfolio and Municipal Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE CASH PRESERVATION CLASSES OF THE MONEY MARKET AND MUNICIPAL MONEY MARKET PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE CASH PRESERVATION CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other
share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ____________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC, the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809 (800) 430-9618.
CONTENTS
Page
INTRODUCTION............................ Prospectus
FINANCIAL HIGHLIGHTS.................... THE BEDFORD FAMILY
INVESTMENT OBJECTIVES AND POLICIES......
YEAR 2000...............................
INVESTMENT LIMITATIONS..................
PURCHASE AND REDEMPTION OF SHARES.......
NET ASSET VALUE.........................
MANAGEMENT..............................
DISTRIBUTION OF SHARES..................
DIVIDENDS AND DISTRIBUTIONS.............
TAXES
DESCRIPTION OF SHARES...................
OTHER INFORMATION.......................
Money Market Portfolio
----------------------
Municipal Money Market
Investment Adviser Portfolio
BlackRock Institutional Management Corporation
Wilmington, Delaware
----------------------
Government Obligations
Custodian Money Market Portfolio
PNC Bank, National Association
Philadelphia, Pennsylvania
----------------------
Administrator and Transfer Agent New York Municipal
PFPC Inc. Money Market Portfolio
Wilmington, Delaware ----------------------
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants
[ ]
December__, 1998
|
THE BEDFORD FAMILY
of
The RBB Fund, Inc.
The four classes of common stock (each, a "Bedford Class") of The RBB Fund, Inc. (the "Fund"), an open-end management investment company, offered by this Prospectus represent interests in a taxable money market portfolio, a municipal money market portfolio, a U.S. Government obligations money market portfolio and a New York municipal money market portfolio (together, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
Money Market Portfolio -- to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
Municipal Money Market Portfolio -- to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Government Obligations Money Market Portfolio -- to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
New York Municipal Money Market Portfolio--to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is exempt from regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes.
The New York Municipal Money Market Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. There can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
BlackRock Institutional Management Corporation serves as investment adviser for the Portfolios, PNC Bank, National Association serves as custodian for the Fund and PFPC Inc. serves as administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December__, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the SEC Internet Website (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. Each of the four classes of the Fund's shares (collectively, the "Bedford Shares" or "Shares") offered by this Prospectus represents interests in one of the following of such investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. To achieve its objective, the Portfolio invests primarily in Municipal Obligations, the interest on which is exempt from regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund and PFPC Inc. ("PFPC") serves as the administrator and the transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the Bedford Classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the Bedford Shares is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Any or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
Annual Fund Operating Expenses (Bedford Classes) as a percentage of average daily net assets
The Fee Table below contains a summary of the annual operating expenses of the Bedford Classes of the Portfolios based on expenses incurred for the fiscal year ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Municipal Government New York
Money Money Obligations Municipal
Market Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
--------- --------- ------------ -------------
Management Fees (after waivers)(1)................. .24% .08% .30% .___%
12b-1 Fees ........................................ .54% .58% .57% .___%
Other Expenses .................................... .19% .23% .105% .___%
---- ---- ----- -----
Total Fund Operating Expenses (Bedford Classes)
(after waivers)(1)............................... .97% .89% .975% . %
|
(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio, Management Fees would be .36%, .34%, .42% and ___%, respectively, and Total Fund Operating Expenses would be 1.10%. 1.15%, 1.10% and ____%, respectively.
Example
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market*.............................................. $10 $31 $54 $119
Municipal Money Market*.................................... $ 9 $28 $49 $110
Government Obligations Money Market*....................... $10 $31 $54 $120
New York Municipal Money Market*........................... $ $ $ $
|
* Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Bedford Classes)" 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. Long-term Shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Bedford Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management -- Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on actual costs and fees charged to each class. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Each of the Municipal Money Market Portfolio's and the New York Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate and by increasing the New York Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal, New York State and New York City personal income taxes at stated rates.
The total returns yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of any of the Bedford Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in Bedford Shares are not reflected in the total return and yield of Shares of the Bedford Classes, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Bedford Classes may differ from total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
The table below sets forth certain information concerning the investment results of the Bedford Classes representing interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios for the periods indicated. The financial data included in this table for each of the periods ended August 31, 1994 through August 31, 1998 are a part of the Fund's financial statements for each of the Portfolios, which are incorporated by reference into the Statement of Additional Information and have been audited by PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), the Fund's independent accountants. The financial data for each of the Portfolios for the periods ended August 31, 1989, 1990, 1991, 1992 and 1993 are a part of previous financial statements audited by PricewaterhouseCoopers. The financial data should be read in conjunction with the financial statements and notes thereto. Further information about the performance of the Portfolios is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained free of charge by calling the telephone number on page 1 of this Prospectus. As of the date of this Prospectus, the Bedford Class of the New York Municipal Money Market Portfolio had not commenced operations.
The Bedford Family
The RBB Fund, Inc. Financial Highlights (c)
For a Share Outstanding Throughout Each Period
Money Market Portfolio
-------------------------------------------------------------------------------------
For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 August 31, 1994
--------------- --------------- --------------- --------------- ---------------
Net asset value,
beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- ---------- -------- --------
Income from investment operations:
Net investment income.......... 0.0462 0.0469 0.0486 0.0278
Net gains on securities (both
realized and unrealized)..... -- -- -- --
--------- ---------- -------- --------
Total from investment
operations............... 0.0462 0.0469 0.0486 0.0278
--------- ---------- -------- --------
Less distributions
Dividends (from net investment
income)...................... (0.0462) (0.0469) (0.0486) (0.0278)
Distributions (from capital
gains)....................... -- -- -- --
--------- ---------- -------- --------
Total distributions........ (0.0462) (0.0469) (0.0486) (0.0278)
--------- ---------- -------- --------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========== ======== ========
Total return..................... 4.72% 4.79% 4.97% 2.81%
Ratios/Supplemental Data
Net assets, end of period (000) $1,392,911 $1,109,334 $935,821 $710,737
Ratios of expenses to average
net assets................... .97%(a) .97%(a) .96%(a) .95%(a)
Ratios of net investment income
to average net assets........... 4.62% 4.69% 4.86% 2.78%
|
For the Period
September 30, 1988
For the For the For the For the (Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
August 31, 1993 August 31, 1992 August 31, 1991 August 31, 1990 August 31, 1989
--------------- --------------- --------------- --------------- ------------------
Net asset value,
beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- -------- -------- ------- --------
Income from investment operations:
Net investment income.......... 0.0243 0.0375 0.0629 0.0765 0.0779
Net gains on securities (both
realized and unrealized)..... -- 0.0007 -- -- --
--------- -------- -------- ------- --------
Total from investment
operations............... 0.0243 0.0382 0.0629 0.0765 0.0779
--------- -------- -------- ------- --------
Less distributions
Dividends (from net investment
income)...................... (0.0243) (0.0375) (0.0629) (0.0765) (0.0779)
Distributions (from capital
gains)....................... -- (0.0007) -- -- --
--------- -------- -------- ------- --------
Total distributions........ (0.0243) (0.0382) (0.0629) (0.0765) (0.0779)
--------- -------- -------- ------- --------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ========
Total return..................... 2.46% 3.89% 6.48% 7.92% 8.81%(b)
Ratios/Supplemental Data
Net assets, end of period (000) $782,153 $736,842 $747,530 $709,757 $152,311
Ratios of expenses to average
net assets................... .95%(a) .95%(a) .92%(a) .92%(a) .93%(a)(b)
Ratios of net investment income
to average net assets.......... 2.43% 3.75% 6.29% 7.65% 8.61%(b)
|
(a) Without the waiver of advisory and administration fees, and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been ____%, 1.12%, 1.14%, 1.17% and 1.16% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively, and 1.27% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Bedford Class of shares within the Portfolio.
The Bedford Family
The RBB Fund, Inc. Financial Highlights (c)
For a Share Outstanding Throughout Each Period
Municipal Money Market Portfolio
-----------------------------------------------------------------------------------------------
For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 August 31, 1994
--------------- --------------- --------------- --------------- ---------------
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Income from investment operations:
Net investment income.... 0.0285 0.0288 0.0297 0.0195
Net gains on securities (both
realized and unrealized) -- -- -- --
-------- -------- -------- --------
Total from investment
operations......... 0.0285 0.0288 0.0297 0.0195
-------- -------- -------- --------
Less distributions
Dividends (from net investment
income)................ (0.0285) (0.0288) (0.0297) (0.0195)
Distributions (from capital
gains)................. -- -- -- --
-------- -------- -------- --------
Total distributions.. (0.0285) (0.0288) (0.0297) (0.0195)
-------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======== ======== ========
Total return............... 2.88% 2.92% 3.01% 1.97%
Ratios/Supplemental Data
Net assets, end of period (000) $213,034 $201,940 $198,425 $182,480
Ratios of expenses to average
net assets............. .85%(a) .84%(a) .82%(a) .77%(a)
Ratios of net investment income
to average net assets..... 2.85% 2.88% 2.97% 1.95%
|
For the Period
September 30, 1988
For the For the For the For the (Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
August 31, 1993 August 31, 1992 August 31, 1991 August 31, 1990 August 31, 1989
--------------- --------------- --------------- --------------- -------------------
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- -------- -------- -------
Income from investment operations:
Net investment income.... 0.0195 0.0287 0.0431 0.0522 0.0513
Net gains on securities (both
realized and unrealized) -- -- -- -- --
-------- ------- -------- -------- -------
Total from investment
operations......... 0.0195 0.0287 0.0431 0.0522 0.0513
-------- ------- -------- -------- -------
Less distributions
Dividends (from net investment
income)................ (0.0195) (0.0287) (0.0431) (0.0522) (0.0513)
Distributions (from capital
gains)................. -- -- -- -- --
-------- ------- -------- -------- -------
Total distributions.. (0.0195) (0.0287) (0.0431) (0.0522) (0.0513)
-------- ------- -------- -------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total return............... 1.96% 2.90% 4.40% 5.35% 5.72%(b)
Ratios/Supplemental Data
Net assets, end of period (000) $215,577 $176,950 $215,140 $195,566 $85,806
Ratios of expenses to average
net assets............. .77%(a) .77%(a) .74%(a) .75%(a) 73%(a)(b)
Ratios of net investment income
to average net assets..... 1.95% 2.87% 4.31% 5.22% 5.70%(b)
|
(a) Without the waiver of advisory and administration fees, and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Municipal Money Market Portfolio would have been ___%, 1.14%, 1.12%, 1.14%, 1.12%, 1.16%, 1.15%, 1.13% and 1.14% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively, and 1.27% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Bedford Class of shares within the Portfolio.
The Bedford Family
The RBB Fund, Inc. Financial Highlights (c)
(For a Share Outstanding Throughout Each Period)
Government Obligations Money Market Portfolio
---------------------------------------------------------------------------------------------
For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 August 31, 1994
--------------- --------------- --------------- --------------- ---------------
Net asset value,
beginning of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- -------- --------
Income from investment operations:
Net investment income...... 0.0449 0.0458 0.0475 0.0270
Net gains on securities (both
realized and unrealized). -- -- -- --
--------- --------- -------- --------
Total from investment
operations........... 0.0449 0.0458 0.0475 0.0270
--------- --------- -------- --------
Less distributions
Dividends (from net investment
income).................. (0.0449) (0.0458) (0.0475) (0.0270)
Distributions (from capital
gains)................... -- -- -- --
--------- --------- -------- --------
Total distributions.... (0.0449) (0.0458) (0.0475) (0.0270)
--------- --------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= =========
Total return................. 4.59% 4.68% 4.86% 2.73%
Ratios/Supplemental Data
Net assets, end of period (000) $209,715 $ 192,599 $163,398 $166,418
Ratios of expenses to average
net assets............... .975%(a) .975%(a) .975%(a) .975%(a)
Ratios of net investment income to
average net assets....... 4.49% 4.58% 4.75% 2.70%
|
For the Period
September 30, 1988
For the For the For the For the (Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
August 31, 1993 August 31, 1992 August 31, 1991 August 31, 1990 August 31, 1989
--------------- --------------- --------------- --------------- ---------------
Net asset value,
beginning of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- --------- --------- ---------
Income from investment operations:
Net investment income...... 0.0231 0.0375 0.0604 0.0748 0.0725
Net gains on securities (both
realized and unrealized). -- 0.0009 -- -- --
-------- -------- --------- --------- ---------
Total from investment
operations........... 0.0231 0.0384 0.0604 0.0748 0.0725
-------- -------- --------- --------- ---------
Less distributions
Dividends (from net investment
income).................. (0.0231) (0.0375) (0.0604) (0.0748) (0.0725)
Distributions (from capital
gains)................... -- (0.0009) -- -- --
-------- -------- --------- --------- ---------
Total distributions.... (0.0231) (0.0384) (0.0604) (0.0748) (0.0725)
-------- -------- --------- --------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total return................. 2.33% 3.91% 6.21% 7.74% 8.64%(b)
Ratios/Supplemental Data
Net assets, end of period (000) $213,741 $225,101 $368,899 $209,378 $ 66,281
Ratios of expenses to average
net assets............... .975%(a) .975%(a) .95%(a) .95%(a) .96%(a)(b)
Ratios of net investment income to
average net assets....... 2.31% 3.75% 6.04% 7.48% 8.34%(b)
|
(a) Without the waiver of advisory fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Government Obligations Money Market Portfolio would have been ____%, 1.09%, 1.10%, 1.13%, 1.17%, 1.18%, 1.12%, 1.13% and 1.17% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993,1992, 1991 and 1990, respectively, and 1.40% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Bedford Class of shares within the Portfolio.
Money Market Portfolio
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." There is no assurance that the Portfolio will achieve its investment objective. The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests.
BANK OBLIGATIONS. The Portfolio may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
COMMERCIAL PAPER. The Portfolio may purchase commercial paper rated (i) (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
VARIABLE RATE DEMAND NOTES. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the
specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. GOVERNMENT OBLIGATIONS. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
ASSET-BACKED SECURITIES. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a Portfolio will generally be at lower rates than the rates on the prepaid obligations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a Portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
GUARANTEED INVESTMENT CONTRACTS. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively, "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
MUNICIPAL OBLIGATIONS. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Municipal Obligations."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
WHEN-ISSUED SECURITIES. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
ELIGIBLE SECURITIES. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two highest rating categories by at least two Rating Organizations ("Rating Organizations") (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to
eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
MUNICIPAL MONEY MARKET PORTFOLIO
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities, the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Portfolio will be achieved.
MUNICIPAL OBLIGATIONS. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations whose issuers are in the same state, (ii) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects or are issued by issuers located in the same state, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated.
TAX-EXEMPT DERIVATIVE SECURITIES. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
WHEN-ISSUED SECURITIES. The Portfolio may also purchase portfolio securities on a "when-issued" basis as described under "Investment Objectives and Policies -- Money Market Portfolio -- When-Issued Securities."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio as described under "Investment Objectives and Policies -- Money Market Portfolio -- Stand-By Commitments."
ELIGIBLE SECURITIES. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities as described under "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury, others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal. There is no assurance that the investment objective of the Portfolio will be achieved.
Due to fluctuations in interest rates, the market values of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments
are sufficient to cause the securities to have market values, after adjustment, which approximate their par values.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase government securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). For a more complete description of repurchase agreements, see "Investment Objectives and Policies -- Money Market Portfolio -- Repurchase Agreements."
REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions and to meet redemptions. For a more complete description of reverse repurchase agreements, see "Investment Objectives and Policies -- Money Market Portfolio -- Reverse Repurchase Agreements."
MORTGAGE-RELATED AND ASSET-BACKED SECURITIES. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself. The Fund may also acquire asset-backed securities as described under "Investment Objectives and Policies -- Money Market Portfolio -- Asset Backed Securities."
LENDING OF SECURITIES. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities as described under "Investment Objectives and Policies--Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
NEW YORK MUNICIPAL MONEY MARKET PORTFOLIO
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. During periods of normal market conditions, at least 80% of the assets will be invested in Municipal Obligations, the interest on which is Tax-Exempt Interest and which meet certain ratings criteria and present minimal credit risks to the Portfolio. Portfolio obligations held by the New York Municipal Money Market Portfolio will have remaining maturities of 397 days or less
("short-term" obligations). Dividends paid by the Portfolio which are derived from interest attributable to tax-exempt obligations of the State of New York and its political subdivisions, as well as of certain other governmental issuers such as Puerto Rico ("New York Municipal Obligations"), will be excluded from gross income for federal income tax purposes and exempt from New York State and New York City personal income taxes, but will be subject to corporate franchise taxes. Dividends derived from interest on tax-exempt obligations of other governmental issuers will be excluded from gross income for federal income tax purposes, but will be subject to New York State and New York City personal income taxes. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, at least 65% of the Fund's assets will be invested in New York Municipal Obligations. There is no assurance that the investment objective of the New York Municipal Money Market Portfolio will be achieved.
MUNICIPAL OBLIGATIONS. The Portfolio invests in short-term Municipal Obligations. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio -- Municipal Obligations."
Up to 20% of the Portfolio's assets may be invested in Alternative Minimum Tax Securities. Investors should be aware of the possibility of federal, state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (ii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the New York Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated. The Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
TAX-EXEMPT DERIVATIVE SECURITIES. The New York Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. For a description of such securities, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Tax-Exempt Derivative Securities."
WHEN-ISSUED SECURITIES. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
TAXABLE INVESTMENTS. The Portfolio may for defensive or other purposes invest in certain short-term taxable securities when the Portfolio's investment adviser believes that it would be in the best interests of the Portfolio's investors to do so. Taxable securities in which the Portfolio may invest on a short-term basis are obligations of the U.S. Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by Moody's Investor Service, Inc. ("Moody's") or S&P; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. At no time will more than 20% of the Portfolio's total assets be invested in taxable short-term securities unless the Portfolio's investment adviser has determined to temporarily adopt a defensive investment policy in the face of an anticipated softening in the market for Municipal Obligations in general.
ELIGIBLE SECURITIES. The New York Municipal Money Market Portfolio will only purchase "eligible securities." For a more complete description of eligible securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
SPECIAL CONSIDERATIONS. As a non-diversified investment company, the Portfolio may invest a greater proportion of its assets in the obligations of a smaller number of issuers relative to a diversified portfolio. As a result, the value of a non-diversified investment portfolio will fluctuate to a greater degree upon changes in the value of each underlying security than a diversified portfolio. In the opinion of the Portfolio's investment adviser, any risk to the Portfolio should be limited by its intention to continue to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended, and by its policies restricting investments to obligations with short-term maturities and obligations which qualify as eligible securities.
The Portfolio's ability to meet its investment objective is dependent upon the ability of issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest on their securities. New York State and New York City face long-term worsening economic problems, which could seriously affect their ability and that of other issuers of New York Municipal Obligations to meet their financial obligations.
Investors should be aware that certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Portfolio) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowing abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and lower market prices for their outstanding debt obligations. Although several different issues of municipal securities of New York State and its agencies and instrumentalities and of New York City have been downgraded by S&P and Moody's in recent years, the most recent actions of S&P and Moody's have been to place the debit obligations of New York State and New York City on Credit Watch with positive implications and to update the debit obligations of New York City, respectively.
Strong demand for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by such issuers could result in defaults or declines in the market values of their existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although no issuers of New York Municipal Obligations were as of the date of this Prospectus in default with respect to the payment of their debt obligations, the occurrence of any such default could adversely affect the market values and marketability of all New York Municipal Obligations and, consequently, the net asset value of the Portfolio's shares. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
The Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios' respective investment objectives and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolios may not, however, change the following investment limitations (except as noted) without such a vote of their respective shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Portfolios may not borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings in excess of 5% of the Portfolio's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of a Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
The Money Market and Municipal Money Market Portfolios may not:
1. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by a Portfolio, except that up to 25% of the value of a Portfolio's total assets may be invested without regard to such 5% limitation.
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three Business Days (as defined below). "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization, are rated (at the time of purchase) by two or more Rating
Organizations in the highest rating category for such securities, (ii) if rated
by only one Rating Organization, are rated by such Rating Organization in its
highest rating category for such securities, (iii) have no short-term rating and
are comparable in priority and security to a class of short-term obligations of
the issuer of such securities that have been rated in accordance with (i) or
(ii) above, or (iv) are Unrated Securities that are determined to be of
comparable quality to such securities. Purchases of First Tier Securities that
come within categories (ii) and (iv) above will be approved or ratified by the
Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
The Municipal Money Market Portfolio may not:
1. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in obligations at the time of purchase to be invested in issuers in the same industry.
In addition, without shareholder approval, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The New York Municipal Money Market Portfolio may not:
Purchase any securities which would cause 25% or more of the value of the Portfolio's total assets at the time of purchase to be invested in the securities of issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users shall not be deemed to be Municipal Obligations.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
The New York Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
PURCHASE PROCEDURES
GENERAL. Bedford Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania. Investors may purchase Bedford Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or
wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Bedford Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by the Fund by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by PFPC after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
PURCHASES THROUGH AN ACCOUNT. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Bedford Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Bedford Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker. Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Bedford Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares of the Bedford Class designated by the investor as the "Primary Bedford Class" for his Purchase Program. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program
should be directed to the broker. A participant in a Purchase Program may change the designation of the Primary Bedford Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Bedford Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made in available Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
DIRECT PURCHASES. An investor may also make direct investments at any time in any Bedford Class he selects through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment in any of the Bedford Classes by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Portfolio in which he wishes to invest, and mailing it, together with a check payable to "The Bedford Family" to the Bedford Family, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The check must specify the name of the Portfolio for which shares are being purchased. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares in any of the Bedford Classes by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800)533-7719 (in Delaware call collect (302) 791-1196), and provide your name, address, telephone number, Social Security or Tax Identification Number, the Bedford Class selected, the amount being wired, and by which bank or Dealer. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, PA
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of the Portfolio) AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
RETIREMENT PLANS. Bedford Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
REDEMPTION PROCEDURES
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
REDEMPTION OF SHARES IN AN ACCOUNT. An investor who beneficially owns Bedford Shares through an Account may redeem Bedford Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares of the Primary Bedford Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
REDEMPTION OF SHARES OWNED DIRECTLY. A direct investor may redeem any number of Shares by sending a written request to The Bedford Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities
Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by call (888) 261-4073. Neither the Fund, the Distributor, the Portfolios, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers (other
than the Distributor), financial institutions, securities dealers, financial
planners or other industry professionals, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by
attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization Form that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next day that a wire transfer can be effected. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
REDEMPTION BY CHECK. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100: however, a broker may establish a higher minimum. An
investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
ADDITIONAL REDEMPTION INFORMATION. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in a Bedford Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the proportionate interest of each class in the value of the securities, cash and other assets of the Portfolio, subtracting the accrued and actual
liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of the Fund is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
BOARD OF DIRECTORS
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen investment portfolios. Each of the Bedford Classes represents interests in one of the following portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
INVESTMENT ADVISER
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreements between BIMC and RBB, with respect to the Money Market and Government Obligations Money Market Portfolios, respectively, provide for BIMC to also assist generally in supervising the operations of such Portfolios, and to maintain such Portfolio's financial accounts and records. These administrative responsibilities have been delegated to PFPC as described below.
For the services provided to and expenses assumed by it for the benefit of each of the Money Market and Government Obligations Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the services provided and expenses assumed by it with respect to the Municipal Money Market and New York Municipal Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
For the Fund's fiscal year ended August 31, 1998, the Fund paid investment advisory fees aggregating .24% of the average net assets of the Money Market Portfolio, .08% of the average net assets of the Municipal Money Market Portfolio and .30% of the average net assets of the Government Obligations Money Market Portfolio. For that same year, BIMC waived approximately .13%, .26% and .12% of average net assets of the Money Market Portfolio, Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio, respectively.
PNC Bank was formerly sub-adviser to the Money Market, Municipal Money Market and Government Obligations Portfolios and provided research, credit analysis and recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by such Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
ADMINISTRATOR
PFPC serves as the administrator for the Municipal Money Market and New York Municipal Money Market Portfolios and generally assists those Portfolios in all aspects of their administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of each of these Portfolios. Pursuant to its advisory agreements with the Fund with respect to the Money Market and Government Obligations Money Market Portfolios, BIMC provides administrative services to such Portfolios pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations
under such advisory agreements. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market and Government Obligations Money Market Portfolios which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolios to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND CUSTODIAN
PNC Bank serves as the Fund's custodian and PFPC, an indirect wholly owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with Dealers for the provision of certain shareholder support services to customers of such Dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
DISTRIBUTOR
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as Distributor of the Shares of each of the Bedford Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
EXPENSES
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. The Bedford Classes of the Fund pay their own distribution fees and may pay a different share than 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 Bedford Class or if they receive different services.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of lowering yield to investors.
For the Fund's fiscal year ended August 31, 1998, the Fund's total expenses were 1.10% of the average net assets with respect to the Bedford Class of the Money Market Portfolio (not taking into account waivers of .13%), were 1.15% of the average net assets with respect to the Bedford Class of the Municipal Money Market Portfolio (not taking into account waivers of .26%) and were 1.10% of the average net assets with respect to the Bedford Class of the Government Obligations Money Market Portfolio (not taking into account waivers of .125%).
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Bedford Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Bedford Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net assets of the relevant Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Bedford Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including broker/dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse broker/dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or broker/dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Bedford Class the fee agreed to under the Distribution Agreement. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Bedford Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of trading of the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Money Market Portfolio and the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolios' investments, that a portion of each Portfolio's distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
Exempt interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income (but not corporate franchise) taxes. The New York Municipal Money Market Portfolio will determine annually the percentage amounts exempt from New York State and New York City personal income taxes, and the amounts, if any, subject to such taxes. The exclusion or exemption of interest income for federal income tax purposes, or New York State or New York City personal income tax purposes, in most cases does not result in an exemption under the tax laws of any other state or local authority.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement entered into with the Distributor and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BEDFORD CLASSES OF THE MONEY MARKET, MUNICIPAL MONEY MARKET, GOVERNMENT OBLIGATIONS MONEY MARKET AND NEW YORK
MUNICIPAL MONEY MARKET PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE BEDFORD CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information
under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ____________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all of the classes of the Fund.
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
ESTABLISHED 1832
JMS, INC.
PROSPECTUS
THE JANNEY
MONTGOMERY SCOTT
MONEY FUNDS
DECEMBER __, 1998
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 INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON HAS HAVING BEEN AUTHORIZED BY THE FUND
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
TABLE OF CONTENTS
PAGE
FINANCIAL HIGHLIGHTS.............................
INVESTMENT OBJECTIVES AND POLICIES............... YEAR 2000........................................ INVESTMENT LIMITATIONS........................... PURCHASE AND REDEMPTION OF SHARES................
NET ASSET VALUE..................................
MANAGEMENT....................................... DISTRIBUTION OF SHARES...........................
DIVIDENDS AND DISTRIBUTIONS...................... TAXES............................................ DESCRIPTION OF SHARES............................ OTHER INFORMATION................................
INVESTMENT ADVISER
BlackRock Institutional Management Corporation
Wilmington, Delaware
CUSTODIAN
PNC Bank, National Association
Philadelphia, Pennsylvania
ADMINISTRATOR AND TRANSFER AGENT
PFPC Inc.
Wilmington, Delaware
COUNSEL
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
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[ ]
THE JANNEY MONTGOMERY SCOTT MONEY FUNDS
OF THE RBB FUND, INC.
The Janney Montgomery Scott Money Funds consists of four classes of common stock (collectively, the "Janney Classes") of The RBB Fund, Inc. (the "Fund"), an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares of the classes (collectively, the "Janney Shares" or "Shares") offered by this Prospectus represent interests in a taxable money market portfolio, a municipal money market portfolio, a U.S. Government obligations money market portfolio, and a New York municipal money market portfolio (collectively, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
MONEY MARKET PORTFOLIO - to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
MUNICIPAL MONEY MARKET PORTFOLIO - to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO - to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
NEW YORK MUNICIPAL MONEY MARKET PORTFOLIO - to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is exempt from the regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes and which meet certain ratings criteria and present minimal credit risks. The New York Municipal Money Market Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIOS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
An investor may purchase and redeem Shares of any of the Janney Classes through Janney Montgomery Scott ("JMS"). See "Purchase and Redemption of Shares."
BlackRock Institutional Management Corporation ("BIMC") serves as investment adviser for the Portfolios and PNC Bank National Association ("PNC Bank") serves as custodian for the Fund. PFPC Inc. ("PFPC") serves as administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December__, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800)430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the SEC Internet Website (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
FEE TABLE
ANNUAL FUND OPERATING EXPENSES (JANNEY SHARES)
The Fee Table below contains a summary of the annual operating expenses of the Janney Classes of the Portfolios based on expenses incurred for the fiscal year ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market Money Market
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ------------- ------------
Management Fees (after waivers)(1)
12b-1 Fees(1).................... ___% ___% ___% ___%
Other Expenses (after .60 .60 .60 .60
waivers)(1)....................
Total Fund Operating ___ ___ ___ ___
Expenses (Janney
Classes) (after
waivers and
reimbursements)(1)............. % % % %
=== === === ===
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(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio, Management Fees would be ___%, ___%, ___%, and ___%, respectively; Other Expenses would be ___%, ___%, ___%, and ___%, respectively; and Total Fund Operating Expenses would be ____%, ____%, ___%, and ____%, respectively.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Money Market*................................................. $ $ $ $
Municipal Money Market*....................................... $ $ $ $
Government Obligations Money Market*.......................... $ $ $ $
New York Municipal Money Market*.............................. $ $ $ $
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*Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Janney Classes)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Janney Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management--Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on actual costs and fees charged to each class. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield", and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income
is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Each of the Municipal Money Market Portfolio's and the New York Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate and by increasing the New York Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal, New York State and New York City personal income taxes at stated rates.
The Total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of any of the Janney Classes will fluctuate and is not necessarily representative of future results. Any fees charged by JMS directly to their customers in connection with investments in the Janney Classes are not reflected in the total return and yields of the Janney Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Janney Classes may differ from total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
The table below sets forth certain information concerning the investment results of the Janney Classes representing interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios for the periods indicated. The financial data included in this table for each of the periods ended August 31, 1998, 1997, 1996 and 1995 are part of the Fund's financial statements for each of the Portfolios, which are incorporated by reference into the Statement of Additional Information and have been audited by _____________________________________________________, the Fund's independent accountants. The financial data should be read in conjunction with such financial statements and notes thereto. Further information about the performance of the Portfolios is available in the Annual Report to Shareholders. Both the Annual Report to Shareholders and the Statement of Additional Information may be obtained free of charge by calling the telephone number on page 1 of this Prospectus.
THE JANNEY MONTGOMERY SCOTT MONEY FUNDS
THE RBB FUND, INC.
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS (C)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR THE PERIOD
JUNE 12, 1995
FOR THE FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED YEAR ENDED OPERATIONS) TO
AUGUST 31, 1998 AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995
--------------- --------------- --------------- ---------------
Net asset value, beginning of year....... $1.00 $1.00 $1.00
----- ----- -----
Income from investment operations:
Net investment income.................. 0.0459 0.0465 0.0112
------ ------ ------
Total from investment
operations.................... 0.0459 0.0465 0.0112
------ ------ ------
Less distributions
Dividends (from net investment
income).............................. (0.0459) (0.0465) (0.0112)
-------- -------- --------
Total distributions............. (0.0459) (0.0465) (0.0112)
-------- -------- --------
Net asset value, end of year............. $1.00 $1.00 $1.00
===== ===== =====
Total Return............................. 4.69% 4.76% 5.30%(b)
Ratios/Supplemental Data
Net assets, end of year (000).......... $736,855 $561,865 $443,645
Ratios of expenses to average
net assets........................... 1.00%(a) 1.00%(a) 1.00%(a)(b)
Ratios of net investment income to
average net assets................... 4.59% 4.65% 5.04%(b)
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(a) Without the waiver of advisory, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been _____%, 1.22%, 1.23%, and 1.23% for the years ended August 31, 1998, 1997 and 1996 and the period ended August 31, 1995, respectively.
(b) Annualized.
(c) Financial Highlights relate solely to the Janney Class of shares within the Money Market Portfolio.
THE JANNEY MONTGOMERY SCOTT MONEY FUNDS
THE RBB FUND, INC.
MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS (C)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR THE PERIOD
JUNE 12, 1995
FOR THE FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED YEAR ENDED OPERATIONS) TO
AUGUST 31, 1998 AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995
--------------- --------------- --------------- ---------------
Net asset value, beginning of year....... $1.00 $1.00 $1.00
----- ----- -----
Income from investment operations:
Net investment income.................. 0.0285 0.0278 0.0063
------ ------ ------
Total from investment
operations.................... 0.0285 0.0278 0.0063
------ ------ ------
Less distributions
Dividends (from net investment
income).............................. (0.0285) (0.0278) (0.0063)
-------- -------- --------
Total distributions............. (0.0285) (0.0278) (0.0063)
-------- -------- --------
Net asset value, end of year............. $1.00 $1.00 $1.00
===== ===== =====
Total Return............................. 2.89% 2.81% 2.87%(b)
Ratios/Supplemental Data
Net assets, end of year (000).......... $108,826 $89,428 $113,256
Ratios of expenses to average
net assets........................... 0.85%(a) 0.94%(a) 1.00%(a)(b)
Ratios of net investment income to
average net assets................... 2.85% 2.78% 2.83%(b)
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(a) Without the waiver of advisory, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Municipal Money Market Portfolio would have been _____%, 1.13%, 1.23%, and 1.30%, for the years ended August 31, 1998, 1997 and 1996 and the period ended August 31, 1995, respectively.
(b) Annualized.
(c) Financial Highlights relate solely to the Janney Class of shares within the Municipal Money Market Portfolio.
THE JANNEY MONTGOMERY SCOTT MONEY FUNDS
THE RBB FUND, INC.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS (C)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR THE PERIOD
JUNE 12, 1995
FOR THE FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED YEAR ENDED OPERATIONS) TO
AUGUST 31, 1998 AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995
--------------- --------------- --------------- ---------------
Net asset value, beginning of year....... $1.00 $1.00 $1.00
----- ----- -----
Income from investment operations:
Net investment income.................. 0.0447 0.0456 0.0109
------ ------ ------
Total from investment
operations.................... 0.0447 0.0456 0.0109
------ ------ ------
Less distributions
Dividends (from net investment
income).............................. (0.0447) (0.0456) (0.0109)
-------- -------- --------
Total distributions............. (0.0447) (0.0456) (0.0109)
-------- -------- --------
Net asset value, end of year............. $1.00 $1.00 $1.00
===== ===== =====
Total Return............................. 4.56% 4.66% 5.03%(b)
Ratios/Supplemental Data
Net assets, end of year (000).......... $352,950 $306,757 $302,585
Ratios of expenses to average
net assets........................... 1.00%(a) 1.00%(a) 1.00%(a)(b)
Ratios of net investment income to
average net assets................... 4.47% 4.56% 4.91%(b)
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(a) Without the waiver of advisory, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Government Obligations Money Market Portfolio would have been _____%, 1.23%, 1.25%, and 1.28%, for the years ended August 31, 1998, 1997 and 1996 and the period ended August 31, 1995, respectively.
(b) Annualized.
(c) Financial Highlights relate solely to the Janney Class of shares within the Government Obligations Money Market Portfolio.
THE JANNEY MONTGOMERY SCOTT MONEY FUNDS
THE RBB FUND, INC.
NEW YORK MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS (C)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR THE PERIOD
JUNE 9, 1995
FOR THE FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED YEAR ENDED OPERATIONS) TO
AUGUST 31, 1998 AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995
--------------- --------------- --------------- ---------------
Net asset value, beginning of year....... $1.00 $1.00 $1.00
----- ----- -----
Income from investment operations:
Net investment income.................. 0.0276 0.0262 0.0062
------ ------ ------
Total from investment
operations.................... 0.0276 0.0262 0.0062
------ ------ ------
Less distributions
Dividends (from net investment
income).............................. (0.0276) (0.0262) (0.0062)
-------- -------- --------
Total distributions............. (0.0276) (0.0262) (0.0062)
-------- -------- --------
Net asset value, end of year............. $1.00 $1.00 $1.00
===== ===== =====
Total Return............................. 2.80% 2.65% 2.72%(b)
Ratios/Supplemental Data
Net assets, end of year (000).......... $30,442 $20,032 $14,671
Ratios of expenses to average
net assets........................... .80%(a) .93%(a) 1.00%(a)(b)
Ratios of net investment income to
average net assets................... 2.76% 2.62% 2.68%(b)
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(a) Without the waiver of advisory, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the New York Municipal Money Market Portfolio would have been _____%, 1.13%, 1.25%, and 1.28%, for the years ended August 31, 1998, 1997 and 1996 and the period ended August 31, 1995, respectively.
(b) Annualized.
(c) Financial Highlights relate solely to the Janney Class of shares within the New York Municipal Money Market Portfolio.
MONEY MARKET PORTFOLIO
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities". There is no assurance that the Portfolio will achieve its investment objective. The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests.
BANK OBLIGATIONS. The Portfolio may purchase obligations of issuers in the banking industry such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
COMMERCIAL PAPER. The Portfolio may purchase commercial paper (i) rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
VARIABLE RATE DEMAND NOTES. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate.
Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. GOVERNMENT OBLIGATIONS. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
ASSET-BACKED SECURITIES. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a Portfolio will generally be at lower rates than the rates on the prepaid obligations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a Portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price
at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
GUARANTEED INVESTMENT CONTRACTS. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively, "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
MUNICIPAL OBLIGATIONS. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Municipal Obligations."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
WHEN-ISSUED SECURITIES. The Portfolio may purchase portfolio securities on a "when-issued" basis. When issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
ELIGIBLE SECURITIES. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two highest rating
categories by at least two Rating Organizations ("Rating Organizations") (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P"), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
MUNICIPAL MONEY MARKET PORTFOLIO
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Portfolio will be achieved.
MUNICIPAL OBLIGATIONS. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods, or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations whose issuers are in the same state, (ii) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects or are issued by issuers located in the same state, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated.
TAX-EXEMPT DERIVATIVE SECURITIES. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
WHEN-ISSUED SECURITIES. The Portfolio may also purchase portfolio securities on a "when-issued" basis as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
ELIGIBLE SECURITIES. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies--Money Market Portfolio--Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities as described under "Investment Objectives and Policies--Money Market Portfolio--Illiquid Securities " and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal. There is no assurance that the investment objective of the Portfolio will be achieved.
Due to fluctuations in interest rates, the market values of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase government securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). For a more complete description of repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Repurchase Agreements."
REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions and to meet redemptions. For a more complete description of reverse repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Reverse Repurchase Agreements."
MORTGAGE-RELATED AND ASSET-BACKED SECURITIES. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself. The Fund may also acquire asset-backed securities as described under "Investment Objectives and Policies--Money Market Portfolio--Asset-Backed Securities."
LENDING OF SECURITIES. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities as described under "Investment Objectives and Policies--Money Market Portfolio--Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
NEW YORK MUNICIPAL MONEY MARKET PORTFOLIO
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income that is exempt from federal, New York State and New York City personal income taxes as is consistent
with preservation of capital and liquidity. During periods of normal market conditions, at least 80% of the assets will be invested in Municipal Obligations, the interest on which is Tax-Exempt Interest and which meet certain ratings criteria and present minimal credit risks to the Portfolio. Portfolio obligations held by the New York Municipal Money Market Portfolio will have remaining maturities of 397 days or less ("short-term obligations"). Dividends paid by the Portfolio which are derived from interest attributable to tax-exempt obligations of the State of New York and its political subdivisions, as well as of certain other governmental issuers such as Puerto Rico ("New York Municipal Obligations"), will be excluded from gross income for federal income tax purposes and exempt from New York State and New York City personal income taxes, but will be subject to corporate franchise taxes. Dividends derived from interest on tax-exempt obligations of other governmental issuers will be excluded from gross income for federal income tax purposes, but will be subject to New York State and New York City personal income taxes. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, at least 65% of the Fund's assets will be invested in New York Municipal Obligations. There is no assurance that the investment objective of the New York Municipal Money Market Portfolio will be achieved.
MUNICIPAL OBLIGATIONS. The Portfolio invests in short-term Municipal Obligations. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Municipal Obligations."
Up to 20% of the Portfolio's assets may be invested in Alternative Minimum Tax Securities. Investors should be aware of the possibility of federal, state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (ii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the New York Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated.
TAX-EXEMPT DERIVATIVE SECURITIES. The Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. For a more complete description of such securities, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Tax-Exempt Derivative Securities."
WHEN-ISSUED SECURITIES. The Portfolio may also purchase portfolio securities on a "when-issued" basis as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
TAXABLE INVESTMENTS. The Portfolio may for defensive or other purposes invest in certain short-term taxable securities when the Portfolio's investment adviser believes that it would be in the best interests of the Portfolio's investors to do so. Taxable securities in which the Portfolio may invest on a short-term basis are obligations of the U.S. Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by Moody's Investors Service, Inc. ("Moody's") or S&P; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. At no time will more than 20% of the Portfolio's total assets be invested in taxable short-term securities unless the Portfolio's investment adviser has determined to temporarily adopt a defensive investment policy in the face of an anticipated softening in the market for Municipal Obligations in general.
ELIGIBLE SECURITIES. The New York Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines. For a more complete description of eligible securities, see "Investment Objectives and Policies--Money Market Portfolio--Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
SPECIAL CONSIDERATIONS. As a non-diversified investment company, the Portfolio may invest a greater proportion of its assets in the obligations of a smaller number of issuers relative to a diversified portfolio. As a result, the value of a non-diversified investment portfolio will fluctuate to a greater degree upon changes in the value of each underlying security than a diversified portfolio. In the opinion of the Portfolio's investment adviser, any risk to the Portfolio would be mitigated by its policies restricting investments to obligations with short-term maturities and obligations which qualify as eligible securities.
The Portfolio's ability to meet its investment objective is dependent upon the ability of issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest on their securities. New York State and New York City face long-term economic problems that could seriously affect their ability and that of other issuers of New York Municipal Obligations to meet their financial obligations.
Investors should be aware that certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Portfolio) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowing abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and fewer markets for their outstanding debt obligations. Although, several different issues of municipal securities of New York State and its agencies and instrumentalities and of New
York City have been downgraded by S&P and Moody's. In recent years, the most recent actions of S & P and Moody's have been to place the debt obligations of New York State and New York City on creditwatch with positive implications and to upgrade the debt obligations of New York City, respectively. Strong demand for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by such issuers of New York Municipal Obligations could result in defaults or declines in the market values of those issuers' existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although no issuers of New York Municipal Obligations were as of the date of this Prospectus in default with respect to the payment of their debt obligations, the occurrence of any such default could adversely affect the market values and marketability of all New York Municipal Obligations and consequently, the net asset value of the Portfolio's shares. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities as described under "Investment Objectives and Policies--Money Market Portfolio--Illiquid Securities " and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
THE SERVICES PROVIDED TO THE FUND BY BIMC AND OTHERS DEPEND IN LARGE
PART UPON THE SMOOTH FUNCTIONING OF THEIR COMPUTER SYSTEMS. MANY COMPUTER
SOFTWARE SYSTEMS IN USE TODAY CANNOT RECOGNIZE THE YEAR 2000, BUT REVERT TO 1900 OR SOME OTHER DATE, DUE TO THE MANNER IN WHICH DATES WERE ENCODED OR CALCULATED. THE CAPABILITY OF THESE SYSTEMS TO RECOGNIZE THE YEAR 2000 COULD HAVE A NEGATIVE
IMPACT ON BIMC'S PROVISION OF INVESTMENT ADVISORY SERVICES, INCLUDING THE HANDLING OF SECURITIES TRADES PRICING. BOTH BIMC AND PFPC HAVE ADVISED THE FUND THAT THEY HAVE BEEN REVIEWING ALL OF THEIR COMPUTER SYSTEMS, ARE ACTIVELY WORKING ON NECESSARY CHANGES TO THOSE SYSTEMS TO PREPARE FOR THE YEAR 2000 AND EXPECT THAT GIVEN THE EXTENSIVE TESTING WHICH THEY ARE UNDERTAKING, THEIR SYSTEMS WILL BE YEAR 2000 COMPLIANT BEFORE SUCH DATE. THERE CAN, HOWEVER, BE NO ASSURANCE THAT BIMC OR ANY OTHER SERVICE PROVIDER WILL BE SUCCESSFUL IN ACHIEVING YEAR 2000 COMPLIANCE, OR THAT INTERACTION WITH OTHER NON-COMPLYING COMPUTER SYSTEMS WILL NOT IMPAIR SERVICES TO THE FUND AT THAT TIME.
The Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios' respective investment objectives and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolios may not, however, change the following investment limitations (except as noted) without such a vote of their respective shareholders. (A more detailed description of the
following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Portfolios may not borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings in excess of 5% of the Portfolio's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of a Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
The Money Market and Municipal Money Market Portfolios may not:
1. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by a Portfolio, except that up to 25% of the value of a Portfolio's total assets may be invested without regard to such 5% limitation.
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of itstotal assets to be invested in the obligations of issuers in any other industry.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three Business Days
(as defined below). "First Tier Securities" include eligible
securities that (i) if rated by more than one Rating Organization,
are rated (at the time of purchase) by two or more Rating
Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such
Rating Organization in its highest rating category for such
securities, (iii) have no short-term rating and are comparable in
priority and security to a class of short-term obligations of the
issuer of such securities that have been rated in accordance with
(i) or (ii) above, or (iv) are Unrated Securities that are
determined to be of comparable quality to such securities. Purchases
of First Tier Securities that come within categories (ii) and (iv)
above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
The Municipal Money Market Portfolio may not:
1. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in obligations at the time of purchase to be invested in issuers in the same industry.
In addition, without shareholder approval, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The New York Municipal Money Market Portfolio may not:
1. Purchase any securities which would cause 25% or more of the value of the Portfolio's total assets at the time of purchase to be invested in the securities of issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
In addition, without shareholder approval, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest.
PURCHASE PROCEDURES
GENERAL. Janney Shares are sold without a sales load on a continuous basis. Investors may purchase Janney Shares through an account maintained by the investor with JMS ("the Account"). The Fund in its sole discretion may accept or reject any order for purchases of Janney Shares.
All payments for initial and subsequent investments should be in U.S. dollars. JMS is responsible for the prompt transmission of the order to the Fund's transfer agent. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order from JMS and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received by JMS. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
PURCHASES THROUGH AN ACCOUNT. Purchases of Shares may be effected through an investor's Account with JMS through procedures established in connection with the requirements of Accounts at JMS. In such event, beneficial ownership of Janney Shares will be recorded by JMS and will be reflected in the Account statements provided by JMS to such investors. JMS may impose minimum investment Account requirements. Although JMS does not impose a sales charge for purchases of Janney Shares, depending on the terms of an investor's Account with JMS, JMS may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from JMS, and this Prospectus should be read in conjunction with any information received from JMS.
JMS may offer investors the ability to purchase Janney Shares under an automatic purchase program (a "Purchase Program") established by it. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account with JMS automatically invested in Shares of Janney Class designated by the investor as the "Primary Janney Class" for his Purchase Program. The frequency of investments and the minimum investment requirement may be established by JMS and the Fund. In addition, JMS may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular JMS's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to JMS. A participant in a Purchase Program may change the designation of the Primary Janney Class at any time by so instructing JMS.
If JMS makes special arrangements under which orders for Janney Shares are received by PFPC prior to 12:00 noon Eastern Time, and the JMS guarantees that payment for such Shares will be made in available Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
REDEMPTION PROCEDURES
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
REDEMPTION OF SHARES IN AN ACCOUNT. An investor who beneficially owns Janney Shares through an Account may redeem Janney Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting JMS. It is the responsibility of JMS to transmit purchase and redemption orders to PFPC and credit its investors' accounts with the redemption proceeds on a timely basis. If such notice is received by PFPC by 12:00 noon
Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
JMS will also redeem each day a sufficient number of Shares of the Primary Janney Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Janney Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
JMS reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
REDEMPTION BY CHECK. The Fund provides investors with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to JMS. JMS will then arrange for the checks to be honored by PNC Bank. Investors who own Janney Shares through an Account should contact JMS for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
ADDITIONAL REDEMPTION INFORMATION. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in a Janney Class involuntarily, on thirty days' notice, if such account falls below $500 and during such thirty day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the proportionate interest of each class in the value of the securities, cash and other assets of the Portfolio, subtracting the accrued and actual liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of the Fund is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
BOARD OF DIRECTORS
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen investment portfolios. Each of the Janney Classes represents interests in one of the following portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
INVESTMENT ADVISER
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $_____ billion of assets, of which approximately $_______ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. the agreements between BIMC and RBB, with respect to the money market and government obligations money market portfolios, respectively, provide for BIMC to also assist generally in supervising the operations of such portfolios, and to maintain such portfolios' financial accounts and records. these administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of each of the Money Market and Government Obligations Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the services provided and expenses assumed by it with respect to the Municipal Money Market and New York Municipal Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
For the Fund's fiscal year ended August 31, 1998, the Fund paid investment advisory fees aggregating __% of the average net assets of the Money Market Portfolio, __% of the average net assets of the Municipal Money Market Portfolio, __% of the average net assets of the Government Obligations Money Market Portfolio and __% of the average net assets of the New York Municipal Money Market Portfolio. For that same year, BIMC waived approximately ___%, __%, __%, and __% of the average net assets of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio, respectively.
PNC Bank was formerly sub-adviser to the money market, municipal money market and government obligations portfolios and provided research, credit analysis and recommendations with respect to each such portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to bimc and in return, BIMC'S obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from bimc an amount equal to 75% of the investment advisory fee paid by each such portfolio to BIMC. The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by such portfolios to BIMC. The services provided by BIMC and the fees payable by the portfolio for these services are described further in the statement of additional information under "Management of the Company."
ADMINISTRATOR
PFPC serves as the administrator for the Municipal Money Market and New York Municipal Money Market Portfolios and generally assists those Portfolios in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of each of these Portfolios. Pursuant to its advisory agreements with the Fund with respect to the Money Market and Government Obligations Money Market Portfolios, BIMC provides administrative services to such Portfolios pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreements. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market and Government Obligations Money Market Portfolios which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolios to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND CUSTODIAN
PNC Bank serves as the Fund's custodian and PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support services to customers of such broker/dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
DISTRIBUTOR
Provident Distributors, Inc. (the "Distributor"), with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania, 19428, acts as distributor of the Shares of each of the Janney Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement).
EXPENSES
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. The Janney Classes of the Fund pay their own distribution fees and may pay a different share than 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 Janney Classes or if they receive different services.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of lowering yield to investors.
For the Fund's fiscal year ended August 31, 1998, the Fund's total expenses were ____% of the average net assets with respect to the Janney Class of the Money Market Portfolio (not taking into account waivers and reimbursements of __%), ____% of the average net assets with respect to the Janney Class of the Municipal Money Market Portfolio (not taking into account waivers and reimbursements of ___%), ____% of the average net assets with respect to the Janney Class of the Government Obligations Money Market Portfolio
(not taking into account waivers and reimbursements of ___%) and ____% of the average net assets with respect to the Janney Class of the New York Municipal Money Market Portfolios (not taking into account waivers and reimbursements of ___%).
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Janney Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Janney Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net assets of the relevant Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Janney Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may re-allocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Janney Class the fee agreed to under the Distribution Agreement. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Janney Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Money Market Portfolio and the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolios' investments, that a portion of the Portfolios' distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
Exempt interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income (but not corporate franchise) taxes. The New York Municipal Money Market Portfolio will determine annually the percentage amounts exempt from New York
State and New York City personal income taxes, and the amounts, if any, subject to such taxes. The exclusion or exemption of interest income for federal income tax purposes, or New York State or New York City personal income tax purposes, in most cases does not result in an exemption under the tax laws of any other state or local authority.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement entered into with the Distributor and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE JANNEY CLASSES OF THE MONEY MARKET, MUNICIPAL MONEY MARKET, GOVERNMENT OBLIGATIONS MONEY MARKET AND NEW YORK
MUNICIPAL MONEY MARKET PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE JANNEY CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record beneficially 25% or more of the outstanding shares of all of the classes of the Fund.
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to Janney
Montgomery Scott, 1801 Market Street, Philadelphia, PA 19103-1675; toll free
1-800-JANNEYS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
CONTENTS
PAGE
INTRODUCTION.......................................
INVESTMENT OBJECTIVE AND POLICIES.................. INVESTMENT LIMITATIONS............................. YEAR 2000.......................................... PURCHASE AND REDEMPTION OF SHARES..................
NET ASSET VALUE....................................
MANAGEMENT.........................................
DIVIDENDS AND DISTRIBUTIONS........................ TAXES.............................................. DESCRIPTION OF SHARES.............................. OTHER INFORMATION..................................
INVESTMENT ADVISER
BlackRock Institutional Management Corporation
Wilmington, Delaware
DISTRIBUTOR
Provident Distributors, Inc.
Conshohocken, Pennsylvania
CUSTODIAN
PNC Bank, National Association
Philadelphia, Pennsylvania
ADMINISTRATOR AND TRANSFER AGENT
PFPC Inc.
Wilmington, Delaware
COUNSEL
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
[ ]
RBB SELECT
MONEY MARKET PORTFOLIO
PROSPECTUS AND SUMMARY
DESCRIPTION FOR THE SELECT SHARES
OF THE MONEY MARKET PORTFOLIO
December __, 1998
RBB
SELECT MONEY MARKET PORTFOLIO
OF
THE RBB FUND, INC.
The Select Class consists of one class of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company. The shares offered by this Prospectus ("Select Shares" or "Shares") represent interests in the Fund's Money Market Portfolio.
The investment objective of the Money Market Portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
BlackRock Institutional Management Corporation serves as investment adviser for the Portfolio, PNC Bank, National Association ("PNC Bank") serves as custodian for the Fund and PFPC Inc. serves as administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. acts as distributor for the Fund.
Select Shares are sold by the Fund's distributor to investment advisers maintaining accounts with PNC Bank or its affiliates. Select Shares will also be sold to customers, including individuals, trusts, partnerships and corporations, who maintain accounts with PNC Bank or its affiliates, and who have authorized PNC Bank or its affiliates to invest their assets in the Fund. Shares are sold and redeemed without any purchase or redemption charge imposed by the Fund, although PNC Bank or its affiliates may charge their customers in connection with the management of their accounts.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998 has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained free of charge by calling the Fund at 1-800-430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related material on the SEC Internet Website (http://www.sec.gov).
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 ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen investment portfolios. Shares of the Select Class ("Select Class" or "Class") of the Fund offered by this Prospectus represent interests in the Fund's Money Market Portfolio (the "Money Market Portfolio" or the "Portfolio").
The investment objective of the Portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and which present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Portfolio seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that it will be able to maintain a stable net asset value of $1.00 per share.
The Portfolio's investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund and PFPC Inc. ("PFPC") serves as administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's shares.
An investment in the Portfolio is subject to certain risks, as set forth in detail under "Investment Objective and Policies." The Portfolio, to the extent set forth under "Investment Objective and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements; the purchase of asset-backed securities; the purchase of securities on a "when-issued" or "forward commitment" basis; the purchase of stand-by commitments; and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objective and Policies."
For detailed information of how to purchase or redeem Select Shares, please refer to the section of this Prospectus entitled "Purchase and Redemption of Shares."
FEE TABLE
The following table illustrates the estimated annual operating expenses for Select Shares of the Portfolio (after expected fee waivers and expense reimbursements) for the current fiscal period. An example based on the summary is also shown.
ANNUAL FUND OPERATING EXPENSES (SELECT SHARES) MONEY MARKET
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS PORTFOLIO
Management Fees (after waivers)(1)................................... .22%
Other Expenses....................................................... .05%
---
Total Fund Operating Expenses
(after waivers)(1)................................................... .27%
====
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(1) Management Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers, Management Fees would be .37% and Total Fund Operating Expenses would be .42%.
EXAMPLE*
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS
------ -------
Money Market Portfolio* $3 $9
|
*Other classes of this Portfolio are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in Select Shares of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management-Investment Adviser" below.) The figure shown in the Fee Table for "Management Fees" is based on actual fees incurred by the Portfolio during its last fiscal year. "Other Expenses" is estimated for the current fiscal year. The Fee Table reflects a voluntary waiver of Management Fees for the Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figure reflected in the Fee Table. In addition, the investment adviser is currently voluntarily assuming additional expenses of the Portfolio. There can be no assurance that the investment adviser will continue to assume such expenses. Assumption of additional expenses will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time the Portfolio may advertise the "total return", "yield" and "effective yield" of its Select Shares. TOTAL RETURN AND YIELD FIGURES WILL BE BASED ON HISTORICAL EARNINGS AND WILL NOT BE INDICATIVE OF FUTURE PERFORMANCE. The "yield" of the Portfolio refers to the income generated
by an investment in Select Shares of the Portfolio over a seven-day period (which period shall be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in Select Shares of the Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment, operating expenses and market conditions. The total return and yield on Shares will fluctuate and is not necessarily representative of future results. Any fees charged by PNC Bank or its affiliates directly to their customers in connection with their investment accounts will not be reflected in the total return and yields on the Portfolio's Shares, and such fees, if charged, will reduce the actual return received by customers on their investments. The total return and yield on Shares of the Select Class may differ from total return and total return and yields on shares of other classes of the Portfolio depending on the allocation of expenses to each of the classes of the Portfolio.
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." There is no assurance that the Portfolio will achieve its investment objective. The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests.
BANK OBLIGATIONS. The Portfolio may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
COMMERCIAL PAPER. The Portfolio may purchase commercial paper (i) rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is a U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
VARIABLE RATE DEMAND NOTES. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. GOVERNMENT OBLIGATIONS. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
ASSET-BACKED SECURITIES. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued and guaranteed by U.S. Government Agencies and instrumentalities or issued by private companies. Asset backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
MUNICIPAL OBLIGATIONS. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see Statement of Additional Information under "Investment Objectives and Policies."
GUARANTEED INVESTMENT CONTRACTS. The Portfolio may make investments in obligations such as guaranteed investment contracts and similar funding agreements (collectively, "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by
commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
WHEN-ISSUED SECURITIES. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
ELIGIBLE SECURITIES. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated (or whose issuer or, in certain cases, guarantor, is rated) at the time of purchase in the two highest rating categories by at least two Rating Organizations ("Rating Organizations") (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P")), (3) securities that are rated (or whose issuer or, in certain cases, guarantor, is rated) at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities (including guarantees) that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies - Illiquid Securities" in the Statement of Additional Information.
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
The Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the investment limitations summarized below without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings in excess of 5% of the Portfolio's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
4. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such 5% limitation.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a shareholder vote.
1. The Portfolio will limit its purchases of the securities (other than securities with certain types of guarantees) of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three Business Days (as defined below). "First Tier Securities" generally include eligible securities that (i) if rated (or guaranteed by a person which has been rated) by more than one Rating Organization, are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated (or guaranteed by a person which has been rated) by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above (or have a guarantee which satisfies this standard), or (iv) are Unrated Securities that are determined to be of comparable quality to such securities (or have a guarantee which satisfies this standard). The Portfolio's compliance with this diversification requirement is deemed to be compliance with the fundamental diversification limit in paragraph 4 above.
2. The Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
PURCHASE PROCEDURES
GENERAL. Select Shares are sold without a sales load on a continuous basis. The minimum initial investment by an investor is $200 million. The Fund reserves the right to waive this minimum investment requirement in its sole discretion. There is no minimum subsequent investment. The Fund in its sole discretion may accept or reject any order for purchases of Select Shares.
Investors may purchase Select Shares through an account maintained by the investor with PNC Bank or its affiliates ("the Account"). All payments for initial and subsequent investments should be in U.S. dollars. PNC Bank or its affiliates are responsible for the prompt transmission of its customers' orders to the Fund's transfer agent. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order from PNC Bank or its affiliates and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received by PNC Bank or its affiliates. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
PURCHASES THROUGH AN ACCOUNT. Purchases of Select Shares may be effected through an investor's Account with PNC Bank or its affiliates through procedures established in connection with the requirements of Accounts at PNC Bank or its affiliates. In such event, beneficial ownership of Shares will be recorded by PNC Bank or its affiliates and will be reflected in the Account statements provided by PNC Bank or its affiliates to such investors. PNC Bank or its affiliates may impose minimum investment Account requirements. Although PNC Bank or its affiliates do not impose a sales charge for purchases of Shares, depending on the terms of an investor's Account with PNC Bank or its affiliates, PNC Bank or its affiliates may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from PNC Bank or
its affiliates, and this Prospectus should be read in conjunction with any information received from PNC Bank or its affiliates.
PNC Bank or its affiliates may offer investors the ability to purchase Select Shares under an automatic purchase program (a "Purchase Program") established by PNC Bank or its affiliates. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account with PNC Bank or its affiliates automatically invested in Shares of the Portfolio. The frequency of investments and the minimum investment requirement may be established by PNC Bank or its affiliates and the Fund. In addition, PNC Bank or its affiliates may require a minimum amount of cash and/or securities to be deposited in an Account for participants in the Purchase Program. The description of the Purchase Program should be read for details, and any inquiries concerning an Account or a Purchase Program should be directed to PNC Bank or its affiliates.
If PNC Bank or its affiliates makes special arrangements under which orders for Select Shares are received by PFPC prior to 12:00 noon Eastern Time, and PNC Bank or its affiliates guarantees that payment for such Shares will be made in available Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
REDEMPTION PROCEDURES
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
REDEMPTION OF SHARES IN AN ACCOUNT. An investor who beneficially owns Select Shares through an Account may redeem Select Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting PNC Bank or its affiliates. It is the responsibility of PNC Bank or its affiliates to transmit purchase and redemption orders to PFPC and credit its investors' accounts with the redemption proceeds on a timely basis. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
PNC Bank or its affiliates will also redeem each day a sufficient number of Shares to cover debit balances created by transactions in the Account
or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
PNC Bank or its affiliates reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
ADDITIONAL REDEMPTION INFORMATION. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in the Select Class involuntarily, on thirty days' notice, if such account falls below $500 million and during such thirty day notice period the amount invested in such account is not increased to at least $500 million. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
The net asset value per share of the Select Class of the Portfolio for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class of the Portfolio is calculated by adding the value of the proportionate interest of the class in the securities, cash and other assets of the Portfolio, deducting actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Portfolio is calculated independently of each other class.
The Fund seeks to maintain a net asset value of $1.00 per Share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, the Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
BOARD OF DIRECTORS
The business and affairs of the Fund and each of its investment portfolios are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. The Select Class represents interests in the Money Market Portfolio.
INVESTMENT ADVISER
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for the Portfolio. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $ billion of assets, of which approximately $ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolio, BIMC manages such Portfolio and is responsible for all purchases and sales of Portfolio securities. In entering into Portfolio transactions for the Portfolio with a broker, BIMC may take into account the sale by such broker of shares by the Fund, subject to the requirements of best execution. The agreement between BIMC and RBB, with respect to the Money Market Portfolio, provides for BIMC to also assist generally in supervising the operations of the Portfolio, and to maintain the Portfolio's financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of the Money Market Portfolio, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of the average daily net assets of such Portfolio in excess of $500 million. BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for the Portfolio.
For the period ended August 31, 1998, the Fund paid investment advisory fees aggregating __% of the average net assets of the Portfolio. For the same period, BIMC waived fees of approximately __% of the average net assets of the Portfolio.
PNC Bank was formerly sub-adviser to the Portfolio and provided research, credit analysis and recommendations with respect to the Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by the Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolio to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND CUSTODIAN
PNC Bank serves as the Fund's custodian and PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
ADMINISTRATOR
Pursuant to its advisory agreement with the Fund, BIMC provides administrative services to the Portfolio, and is entitled to an administration fee, computed daily and payable monthly at .10% of average daily net assets of the Portfolio. BIMC has delegated to PFPC all of its accounting and administrative obligations under such advisory agreement. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market Portfolio which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolio to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
DISTRIBUTOR
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as Distributor for the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
EXPENSES
The expenses of the Portfolio are deducted from the total income of the Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based on the relative net assets of the investment portfolios at the time such expenses were accrued. The Select Class of the Portfolio may pay a different share than other classes of the Portfolio of other expenses (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by the Select Class.
The investment adviser may assume expenses of the Portfolio from time to time. In certain circumstances, it may assume such expenses on the condition that it be reimbursed by the Portfolio for such amounts prior to the end of a fiscal year. The assumption of expenses by the investment adviser will have the effect of lowering the Portfolio's expense ratio and of increasing its yield to investors.
BANKING LAWS
Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling, or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from issuing, underwriting, selling or distributing securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of such a customer. PNC Bank, BIMC and PFPC are subject to such banking laws and regulations. In addition, state securities laws on this issue may differ from the interpretations of federal law expressed herein and banks and financial institutions may be required to register as dealers pursuant to state law.
Should future legislative, judicial or administrative action prohibit or restrict the activities of banks in connection with the provision of support services to their customers, the Fund might be required to alter materially or cause the Fund to discontinue its arrangements with banks generally and change its method of operations with respect to the Select Shares. It is not anticipated, however, that any change in the Fund's method of operations would affect its net asset value per share or result in a financial loss to any customer.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Portfolio to the Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the Select Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by the Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading of the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in the Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within the Portfolio vary based upon the services provided, which may affect performance. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in the Portfolio. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE EXCLUSIVELY TO THE SELECT CLASS OF THE MONEY MARKET
PORTFOLIO AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE SELECT SHARES OF THE PORTFOLIO.
Each share that represents an interest in the Portfolio has an equal proportionate interest in the assets belonging to the Portfolio with each other share that represents an interest in the Portfolio, even where a share has a different class designation than another share representing an interest in the Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a
meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of the Portfolio will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholders may direct inquiries to the Fund's transfer agent, 400 Bellevue Parkway, Wilmington, DE 19809, or call 1-800-430-9618.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Investment Adviser
BlackRock Institutional Management Corporation
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania
Custodian
PNC Bank, National Association
Philadelphia, Pennsylvania
Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants
ROBERTSON
STEPHENS
Money Market Portfolio
Prospectus and Summary
Description for the Sansom Street Shares
of the Money Market Portfolio
December __, 1998
MONEY MARKET PORTFOLIO
of
THE RBB FUND, INC.
The Sansom Street Family consists of three classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company. The shares of one such class are offered by this Prospectus and represent interests in the Fund's Money Market Portfolio.
The investment objective of the Money Market Portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
BlackRock Institutional Management Corporation serves as investment adviser for the Portfolio, PNC Bank National Association serves as custodian for the Fund and PFPC Inc. serves as administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. acts as distributor for the Fund.
Sansom Street Shares are sold by the Fund's distributor to customers maintaining accounts with banks affiliated with PNC Bank Corp. (the "Banks"). Sansom Street Shares will be sold to customers, including individuals, trusts, partnerships and corporations, who maintain accounts (such as custody, trust or escrow accounts) with the Banks, and who have authorized the Banks to invest in the Fund. Shares are sold and redeemed without any purchase or redemption charge imposed by the Fund, although the Banks may receive compensation from the Fund for services provided in connection with the purchase or redemption of shares. See "Shareholder Servicing." Sansom Street Shares are also sold through any broker that has entered into a dealer agreement with the Fund's distributor.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained free of charge by calling the Fund at (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related material on the SEC Internet Website (http://www.sec.gov).
PROSPECTUS December __1998
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen investment portfolios. Shares ("Sansom Street Shares" or "Shares") of the Sansom Street Class ("Sansom Street Class" or "Class") of the Fund offered by this Prospectus represent interests in the Fund's Money Market Portfolio (the "Money Market Portfolio" or the "Portfolio").
The investment objective of the Portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and which present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Portfolio seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that it will be able to maintain a stable net asset value of $1.00 per share.
The Portfolio's investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund and PFPC Inc. ("PFPC") serves as administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's shares.
An investment in the Portfolio is subject to certain risks, as set forth in detail under "Investment Objective and Policies." The Portfolio, to the extent set forth under "Investment Objective and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of asset-backed securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objective and Policies."
For detailed information of how to purchase or redeem Sansom Street Shares, please refer to the section of this Prospectus entitled "Purchase and Redemption of Shares."
FEE TABLE
The Fee Table below contains a summary of annual operating expenses incurred by the Sansom Street Class of the Money Market Portfolio after fee waivers and expense reimbursements for the fiscal year ended August 31, 1998 as a percentage of average daily net assets. An example based on the summary is also shown.
Annual Fund Operating Expenses (Sansom Street Class) as a percentage of average daily net assets
Money Market
Portfolio
------------
Management Fees (after waivers)(1).............................................. .__%
12b-1 Fees(1) .................................................................. .__%
Other Expenses.................................................................. .__%
Total Fund Operating Expenses (Sansom Street Class)
(after waivers)(1).............................................................. .==%
|
(1) Management Fees and 12b-1 Fees are each based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Management Fees would be ___% and Total Fund Operating Expenses would be ___%.
Example
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market Portfolio*............... $ $ $ $
|
* Other Classes of this Portfolio are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Sansom Street Class of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management-Investment Adviser," "Distribution of Shares" and "Shareholder Servicing" below.) Expense figures are based on actual costs and fees incurred by the Class. The Fee Table
reflects a voluntary waiver of Management Fees for the Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figure reflected in the Fee Table. In addition, the investment adviser is currently voluntarily assuming additional expenses of the Class. There can be no assurance that the investment adviser will continue to assume such expenses. Assumption of additional expenses will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time the Portfolio advertises its "total return, "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of the Portfolio refers to the income generated by an investment in the Portfolio over a seven-day period (which period shall be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in the Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment, operating expenses and market conditions. The total return and yield on Shares of the Sansom Street Class will fluctuate and is not necessarily representative of future results. Any fees charged by the Banks or broker-dealers directly to their customers in connection with investments in the Portfolio are not reflected in the total return and yields on the Portfolio's shares, and such fees, if charged, will reduce the actual return received by customers on their investments. The total return and yield on Shares of the Sansom Street Class may differ from total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio.
The table below sets forth certain information concerning the investment results of the Sansom Street Class for the periods indicated. The financial data included in this table for each of the periods ended August 31, 1994 through August 31, 1998, are a part of the Fund's financial statements for the Portfolio which are incorporated by reference into the Statement of Additional Information and have been audited by ________________________________________________, the Fund's independent accountants. The financial data for such Portfolio for the periods ended August 31, 1989, 1990, 1991, 1992 and 1993 are a part of previous financial statements audited by ________________________. The financial data included in this table should be read in conjunction with the financial statement and related notes. Further information about the Portfolio is available in the Fund's Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on page 1 of this Prospectus.
Sansom Street Class
THE RBB FUND, INC.
Financial Highlights (c)
(For a Share Outstanding Throughout each Period)
---------------------------------------------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995
---------------------------------------------------------------------
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00
------- ------ ------
Income from investment operations:
Net investment income........................... 0.0510 0.0518 0.0543
Net gains on securities (both realized and
unrealized)................................... -- -- --
------- ------- -------
Total from investment operations............ 0.0510 0.0518 0.0543
------- ------- -------
Less distributions
Dividends (from net investment income).......... (0.0510) (0.0518) (0.0543)
Distributions (from capital gains)................ -- -- --
------- ------- -------
Total distributions............................... (0.0510) (0.0518) (0.0543)
------- ------- -------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total return...................................... 5.22% 5.30% 5.57%
Ratios/Supplemental Data
Net assets, end of period (000)................. $570,018 $524,359 $441,614
Ratios of expenses to average net assets........ .49%(a) .48%(a) .39%(a)
Ratios of net investment income to average net
assets........................................ 5.10% 5.18% 5.43%
Money Market Portfolio
---------------------------------------------------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, 1994 August 31, 1993 August 31, 1992 August 31, 1991
---------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------ ------- -------
Income from investment operations:
Net investment income........................... 0.0334 0.0304 0.0435 0.0684
Net gains on securities (both realized and
unrealized)................................... -- -- 0.0007 --
------- ------- ------- -------
Total from investment operations.. ......... 0.0334 0.0304 0.0442 0.0684
------- ------- ------- -------
Less distributions
Dividends (from net investment income).......... (0.0334) (0.0304) (0.0435) (0.0684)
Distributions (from capital gains)................ -- -- (0.0007) --
------- ------- ------- -------
Total distributions.............................. (0.0334) (0.0304) (0.0442) (0.0684)
------- ------- ------- -------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total return...................................... 3.39% 3.08% 4.51% 7.06%
Ratios/Supplemental Data
Net assets, end of period (000)................. $373,745 $190,794 $228,079 $138,418
Ratios of expenses to average net ...assets .39%(a) .34%(a) .35%(a) .37%(a)
Ratios of net investment income to average net
assets........................................ 3.34% 3.04% 4.35% 6.84%
----------------------------------------
For the Period
September 30, 1988
For the (Commencement of
Year Ended Operations) to
August 31, 1990 August 31, 1989
----------------------------------------
Net asset value, beginning of period.............. $ 1.00 $ 1.00
------- -------
Income from investment operations:
Net investment income........................... 0.0810 0.0818
Net gains on securities (both realized and
unrealized)................................... -- --
------- -------
Total from investment operations............ 0.0810 0.0818
------- -------
Less distributions
Dividends (from net investment income).......... (0.0810) (0.0818)
Distributions (from capital gains)................ -- --
------- -------
Total distributions............................... (0.0810) (0.0818)
------- --------
Net asset value, end of period.................... $ 1.00 $ 1.00
======= =======
Total return...................................... 8.40% 9.25%(b)
Ratios/Supplemental Data
Net assets, end of period (000)................. $106,743 $79,656
Ratios of expenses to average net assets........ .47%(a) .50%(a)(b)
Ratios of net investment income to average net
assets........................................ 8.10% 9.04%(b)
|
(a) Without the waiver of advisory fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been ___%, ___%, .64%, .65%, .59%, .60%, .61%, .61% and .73% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991, and 1990, respectively, and .83% (annualized) for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Sansom Street Class of Shares within the portfolio.
Money Market Portfolio
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." There is no assurance that the investment objective of the Portfolio will be achieved. The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests.
Bank Obligations. The Portfolio may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
Commercial Paper. The Portfolio may purchase commercial paper rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is a U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
Variable Rate Demand Notes. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there
may be no active secondary market in the notes, the Portfolio will be able (at any time or during specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. Government Obligations. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
Asset-Backed Securities. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and instrumentalities or issued by private companies. Asset backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase
agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Municipal Obligations. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see Statement of Additional Information under "Investment Objectives and Policies."
Guaranteed Investment Contracts. The Portfolio may make investments in obligations such as guaranteed investment contracts and similar funding agreements (collectively, "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two highest rating categories by at least two Rating Organizations ("Rating Organizations") (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in
certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies --Illiquid Securities" in the Statement of Additional Information.
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
The Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the investment limitations summarized below without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
4. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such 5% limitation.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a shareholder vote.
1. The Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three Business Days (as defined below). "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization, are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by
such Rating Organization in its highest rating category for such
securities, (iii) have no short-term rating and are comparable in priority
and security to a class of short-term obligations of the issuer of such
securities that have been rated in accordance with (i) or (ii) above, or
(iv) are Unrated Securities that are determined to be of comparable quality
to such securities. Purchases of First Tier Securities that come within
categories (ii) and (iv) above will be approved or ratified by the Board of
Directors.
2. The Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Purchase Procedures
Sansom Street Shares are sold without a sales load on a continuous basis by the Fund's Distributor. Purchase of Shares may be made through the Banks acting on behalf of their customers, including individuals, trusts, partnerships and corporations who maintain accounts (such as custody, trust or escrow accounts) with the Banks and who have authorized the Bank to invest in the Fund on the customer's behalf. Investors may also purchase shares through any broker that has entered into a dealer agreement with the Fund's Distributor (a "Dealer"). The minimum initial investment by an investor is $1,500. There is no minimum subsequent investment.
Purchases of Shares may be effected through the customer's accounts at the Banks or investor accounts with the Dealer through procedures established in connection with the requirements of accounts at the Banks or at such Dealer. Confirmations of share purchases and redemptions will be sent to the Banks or such Dealer. Beneficial ownership of Sansom Street Shares will be recorded by the Banks or such Dealer and reflected in the account statements provided by such Banks or by such Dealer to investors. If you wish to purchase Sansom Street Shares, contact your Bank or a Dealer.
The Banks may also impose minimum customer account requirements. Although the Banks do not impose a sales charge for purchases of Sansom Street Shares, depending upon the terms of the particular customer account, the Banks may charge the account fees for automatic investment and other cash management services. Information concerning these minimum account requirements, services and any charges will be provided by the Banks before the customer authorizes the initial purchase of shares. This Prospectus should be read in conjunction with any information received from the Banks. See "Shareholder Servicing."
The shares of the Sansom Street Class of the Portfolio are also available through Robertson Stephens, a registered broker-dealer that has entered into a dealer Agreement with the Fund's Distributor. For distribution services with respect to shares of the Portfolio held by this
firm, the Fund's Distributor pays Robertson Stephens up to .25% of the annual average value of such accounts. Purchases made through this program do not require customers to pay a transaction fee.
Direct Purchases through a Dealer. An investor may make an initial investment by mail by completing and signing an application obtained from a Dealer (an "Application) and mailing it, together with a check payable to "Sansom Street Money Market," to "Sansom Street Money Market," c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
The Fund reserves the right to reject any purchase order.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after receipt of the purchase order in good order and Federal Funds are available to the Fund. Purchase orders received after its close of business are priced at the net asset value next determined on the following Business Day. In those cases in which an investor pays for Shares by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Purchase orders for Shares are accepted only on Business Days.
Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in Sansom Street Shares. Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the Securities and Exchange Commission, the Department of Labor or state securities commissions, are urged to consult their legal advisers before investing fiduciary funds in Sansom Street Shares. See "Management-Banking Laws."
Redemption of Shares
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. It is the responsibility of the Banks and the Dealers to transmit promptly to PFPC a customer's redemption request. In the case of shareholders holding share certificates, the certificates must accompany the redemption request. Investors may redeem all or some of their shares in accordance with one of the procedures described below.
Redemption of Shares In an Account for Bank Customers. A bank customer may redeem all or part of his Sansom Street Shares in accordance with instructions and limitations pertaining to his account at the Bank. Redemption orders are effected at the net asset value per share next determined after receipt of the order by PFPC. Payment for redemption orders received by PFPC on a Business Day before 12:00 noon Eastern Time will be wired the same day in Federal Funds to the customer's account at the Bank, provided that the Fund's custodian is
open for business. If the custodian is not open, payment will be made on the next bank business day. Payment for redemption orders which are received between 12:00 noon Eastern Time and the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time) on a Business Day will be wired in Federal Funds to the customer's account on the next bank business day following receipt of the redemption request. No charge for wiring redemption payments is imposed by the Fund, although the Banks may charge their customer accounts for redemption services. If all shares are redeemed, all accrued but unpaid dividends on those share will be paid with the redemption proceeds.
Redemption of Shares in an Account for Non-Bank Customers. An investor who beneficially owns Shares may redeem Shares in his account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm will also redeem each day a sufficient number of Shares to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written requests to Sansom Street Money Market, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. It is recommended that such requests be sent by registered or certified mail if share certificates accompany the request. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, a signature guarantee is required. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or foreign association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are the Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a
telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by calling (888) 261-4073. Neither the Fund, the Portfolio, the Distributor, PFPC nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following measures:
(1) requiring the appropriate telephone transaction privilege forms; (2)
requiring the caller to provide the names of the account owners, the account
social security number and the name of the Portfolio, all of which must match
the Fund's records; (3) requiring the Fund's service representative to complete
a telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers, financial
institutions, securities dealers, financial planners or other industry
professionals, additional documentation or information regarding the scope of a
caller's authority is required. Finally, for telephone transactions in accounts
held jointly, additional information regarding other account holders is
required. Telephone transactions will not be permitted in connection with IRA or
other retirement plan accounts or by an attorney-in-fact under power of
attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization Form that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors with joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time,
and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cashed at other banks.
Other Redemption Information
The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by the Fund's transfer agent of a request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in the Sansom Street Class involuntarily, on 30 days' notice, if such account drops below $500 and during such 30-day notice period the shareholder does not increase such account to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
The net asset value per share of the Sansom Street Class of the Portfolio for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB, is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class of the Portfolio is calculated by adding the value of the proportionate interest of the class in the securities, cash and other assets of the Portfolio, deducting actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of the Fund is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for the Sansom Street Class of the Portfolio a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, the Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plan of Distribution for the Sansom Street Class (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Sansom Street Class a distribution fee, which is accrued daily and paid monthly, of up to .20% on an annualized basis of the daily net assets of the Sansom Street Class. The actual amount of such compensation under the Plan is agreed upon by the Fund's Board of Directors and by the Distributor. Pursuant to the conditions of an exemptive order granted by the SEC, the Distributor has agreed to waive its fee with respect to the Sansom Street Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Sansom Street Class the fee set forth above. Payments under the Plan are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
The Fund has and will continue to enter into service agreements with the Banks pursuant to which the Banks will render certain support services to their customers in consideration for payment of .25% (on an annualized basis) of the average daily net asset value of such Shares.
Such services may include aggregating and processing purchase and redemption requests from their customers and placing net purchase and redemption orders with PFPC; processing dividend payments from the Fund on behalf of their customers; providing information periodically to their customers showing their positions in the Sansom Street Class; providing sub-accounting with respect to the Sansom Street Shares beneficially owned by their customers or the information necessary for sub-accounting; and providing certain statistical and factual information. In accordance with the conditions of an exemptive order granted by the Securities and Exchange Commission, each service agreement will provide that a Bank will waive its servicing fee with respect to the Sansom Street Class on any day to the extent necessary to assure that the servicing fee required to be accrued by that Class does not exceed the income of that Class on that day. Their customers who are beneficial owners of Sansom Street Shares should read this Prospectus in light of the terms governing their accounts with the Banks.
Board of Directors
The business and affairs of the Fund and each of its investment portfolios are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. The Sansom Street Class represents interests in the Money Market Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for the Portfolio. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiary currently manage over $________ billion of assets, of which approximately $________ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolio, BIMC manages such Portfolio and is responsible for all purchases and sales of Portfolio securities. In entering into Portfolio transactions for the Portfolio with a broker, BIMC may take into account the sale by such broker of shares by the Fund, subject to the requirements of best execution. The agreement between BIMC and RBB with respect to the
Money Market Portfolio provides for BIMC to also assist generally in supervising the operations of such Portfolio, and to maintain the Portfolio's financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of the Money Market Portfolio, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of the average daily net assets of such Portfolio in excess of $500 million. BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for the Portfolio.
For the Fund's fiscal year ended August 31, 1998, the Fund paid investment advisory fees aggregating ____% of the average net assets of the Portfolio. For the same period, BIMC waived fees of approximately _____% of the average net assets of the Portfolio.
Pursuant to it's advisory agreement with Fund relating to the Portfolio, BIMC may enter into agreements with its affliates in which it delegates some or all of its accounting and administrative obligations under the advisory agreement. Any such arrangement has no effect on the advisory fees payable by the Portfolio to BIMC. BIMC has delegated to PFPC all of its accounting and administrative obligations under its advisory agreement with the Fund relating to the Portfolio. PFPC generally assists the Portfolio in all aspects of its administration and operation, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to receive from BIMC and administration fee, computed daily and payable monthly at a rate of .10% of the average daily net assets of the Portfolio. This has no effect on the advisory fees payable by the Portfolio to BIMC. PFPC's principal address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank also serves as the Fund's custodian and PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Administrator
Pursuant to its advisory agreement with the Fund with respect to the Money Market Portfolio, BIMC provides administrative services to the Portfolio, and is entitled to an administration fee, computed daily and payable monthly at .10% of average daily net assets of the Portfolio. BIMC has delegated to PFPC all of its accounting and administrative obligations under such advisory agreement. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market Portfolio which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolio to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor for the Sansom Street Class of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based on the relative net assets of the investment portfolios at the time such expenses were accrued. The Sansom Street Classes of the Fund pay their own distribution fees, and may pay a different share than 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 Sansom Street Classes or if they receive different services.
The investment adviser may assume expenses of the Portfolio from time to time. In certain circumstances, it may assume such expenses on the condition that it be reimbursed by the Portfolio for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of decreasing yield to investors.
For the fiscal year ended August 31, 1998, the total expenses were .___% of average net assets with respect to the Sansom Street Class of the Money Market Portfolio (not taking into account waivers of .___%).
Banking Laws
Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling, or distributing the shares of a registered, open-end investment company continuously engage in the issuance of its shares, and prohibit banks generally from issuing, underwriting, selling or distributing securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of such a customer. PNC Bank, BIMC, PFPC, as well as the Banks, are subject to such banking laws and regulations. In addition, state securities laws on this issue may differ from the interpretations of federal law expressed herein and banks and financial institutions may be required to register as dealers pursuant to state law.
Should future legislative, judicial or administrative action prohibit or restrict the activities of Banks in connection with the provision of support services to their customers, the Fund might be required to alter materials or cause the fund to discontinue its arrangements with Banks generally and change its method of operations with respect to the Sansom Street Shares. It is not anticipated, however, that any change in the Fund's method of operations would affect its net asset value per share or result in a financial loss to any customer.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Portfolio to the Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the Sansom Street Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by the Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading of the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _______ billion shares are currently classified into __ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in the Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE SANSOM STREET CLASS OF THE MONEY MARKET PORTFOLIO AND DESCRIBE ONLY THE INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE SANSOM STREET CLASS OF THIS PORTFOLIO.
Each share that represents an interest in the Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of the Portfolio will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of _______________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC, the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll free (800) 430-9618.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
CONTENTS
Page
INTRODUCTION.....................................
FINANCIAL HIGHLIGHTS.............................
INVESTMENT OBJECTIVES AND POLICIES...............
YEAR 2000........................................
INVESTMENT LIMITATIONS...........................
PURCHASE AND REDEMPTION OF SHARES................
NET ASSET VALUE..................................
DISTRIBUTION OF SHARES...........................
SHAREHOLDER SERVICING............................
MANAGEMENT.......................................
DIVIDENDS AND DISTRIBUTIONS......................
TAXES............................................
DESCRIPTION OF SHARES............................
OTHER INFORMATION................................
Investment Adviser
BlackRock Institutional Management Corporation
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania
Custodian
PNC Bank, National Association
Philadelphia, Pennsylvania
Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants
========================================================= ===================================================
The Sansom
Street
Family
Money Market Portfolio
Municipal Money
Market Portfolio
and
Government Obligations
Money Market Portfolio
Prospectus
December __, 1998
|
THE SANSOM STREET FAMILY
of
The RBB Fund, Inc.
The Sansom Street Family consists of three classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company. The shares of the Sansom Street Classes offered by this Prospectus represent interests in a taxable money market portfolio, a municipal money market portfolio and a U.S. Government obligations money market portfolio. The investment objectives of each investment portfolio described in this Prospectus are as follows:
Money Market Portfolio -- to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
Municipal Money Market Portfolio -- to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Government Obligations Money Market Portfolio -- to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. There can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
BlackRock Institutional Management Corporation serves as investment adviser for these Portfolios and PNC Bank, National Association serves as custodian for the Fund. PFPC Inc. serves as administrator and as transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. acts as distributor for the Fund.
Sansom Street Shares are sold by the Fund's distributor to customers maintaining accounts with banks affiliated with PNC Bank Corp. (the "Banks"). Sansom Street Shares will be sold to customers, including individuals, trusts, partnerships and corporations, who maintain accounts (such as custody, trust or escrow accounts) with the Banks, and who have authorized the Banks to invest in the Fund. Shares are sold and redeemed without any purchase or redemption charge imposed by the Fund, although the Banks may receive compensation from the Fund and charge their customer accounts for services provided in connection with the purchase or redemption of shares. See "Shareholder Servicing." Sansom Street Shares are also sold through dealers that have entered into a dealer agreement with the Fund's Distributor.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the SEC Internet Website (http://www.sec.gov).
PROSPECTUS December __, 1998
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. Each of the three classes (collectively, the "Sansom Street Classes") of the Fund's shares (collectively, the "Sansom Street Shares" or "Shares") offered by this Prospectus represents interests in one of the following investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio (together, the "Portfolios").
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and which present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and which present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Government Obligations Money Market Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund and PFPC Inc. ("PFPC") serves as administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's shares.
An investment in any of the Portfolios is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Some or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment basis," the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
For detailed information of how to purchase or redeem Sansom Street Shares, please refer to the section of this Prospectus entitled "Purchase and Redemption of Shares."
FEE TABLE
The Fee Table below contains a summary of the annual operating expenses incurred by the Sansom Street Class of the Money Market Portfolio for the fiscal year ended August 31, 1998 as a percentage of average daily net assets. The figures shown for the Sansom Street Classes of the Municipal Money Market Portfolio and Government Obligations Money Market Portfolio are based on expenses expected to be incurred by such Classes of these Portfolios in the current fiscal period in the event that Shares of these Classes are offered to the public. No shares of these Classes were offered during the fiscal year ended August 31, 1998. An example based on the summary is also shown.
Annual Fund Operating Expenses (Sansom Street Classes) as a percentage of average daily net assets
Government
Municipal Obligations
Money Market Money Market Money Market
Portfolio Portfolio Portfolio
--------- --------- ---------
Management Fees (after waivers)(1)................. .__% .__% .__%
12b-1 Fees(1) ..................................... .__ .__ .__
Other Expenses..................................... .__ .__ .__
Total Fund Operating Expenses
(Sansom Street Classes)
(after waivers)(1)............................... . % . % . %
=== === ===
|
(1) Management Fees and 12b-1 Fees are each based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Municipal Money Market Portfolio and Government Obligations Money Market Portfolio, Management Fees would be ___%, ___% and ___%, respectively, and Total Fund Operating Expenses would be ___%, ___% and ___%, respectively.
Example
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market*.............................................. $ $ $ $
Municipal Money Market*.................................... $ $ $ $
Government Obligations Money Market*....................... $ $ $ $
|
* Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Sansom Street Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management--Investment Adviser," "Distribution of Shares" and "Shareholder Servicing" below.) Expense figures are based on actual costs and fees charged to each class. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. In addition, the investment adviser is currently voluntarily assuming additional expenses of the Money Market Portfolio. There can be no assurance that the investment adviser will continue to assume such expenses. Assumption of additional expenses will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. The Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment, operating expenses and market conditions. The total return and yield on Shares of each of the Sansom Street Classes will fluctuate and is not necessarily representative of future results. Any fees charged by the Banks or broker/dealers directly to their customers in connection with investments in a Portfolio are not reflected in the total return and yields on a Portfolio's Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of Sansom Street Classes may differ from total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio.
The table below sets forth certain information concerning the investment results of the Sansom Street Classes for the periods indicated. The financial data included in this table for each of the periods ended August 31, 1994 through August 31, 1998 are part of the Fund's financial statements for each of the Portfolios, which have been incorporated by reference into the Statement of Additional Information and have been audited by ______________________________________________________, the Fund's independent accountants. The financial data for each such Portfolio for the periods ended August 31, 1989, 1990, 1991, 1992 and 1993 are a part of previous financial statements audited by ____________________. No financial data for the periods ended August 31, 1994, 1995, 1996, 1997 and 1998 are included for the Sansom Street Class of the Municipal Money Market Portfolio as no shares of such Class had been sold to the public during these periods and for the Sansom Street Class of the Government Obligations Money Market Portfolio as such Class ceased operations on December 4, 1991. The financial data included in the table should be read in conjunction with the financial statements and notes thereto. Further information about the performance of the Portfolios is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained free of charge by calling the telephone number on page 1 of this Prospectus.
Sansom Street Classes
THE SANSOM STREET FAMILY
THE RBB FUND, INC.
Financial Highlights (c)
(For a Share Outstanding Throughout Each Period)
Money Market Portfolio
------------------------------------------------------------------------------------------
For The For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 August 31, 1994
--------------- --------------- --------------- --------------- ---------------
Net asset value,
beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- -------- --------
Income from investment operations:
Net investment income............. 0.0510 0.0518 0.0543 0.0334
Net gains on securities (both
realized and unrealized) -- -- -- --
------- -------- -------- --------
Total from investment
operations.................. 0.0510 0.0518 0.0543 0.0334
------- -------- -------- --------
Less distributions
Dividends (from net investment
income)......................... (0.0510) (0.0518) (0.0543) (0.0334)
Distributions (from capital
gains).......................... -- -- -- --
------- --------- --------- -------
Total distributions........... (0.0510) (0.0518) (0.0543) (0.0334)
------- --------- --------- -------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ========= ========= =========
Total return........................ 5.22% 5.30% 5.57% 3.39%
Ratios/Supplemental Data
Net assets, end of period (000)... $570,018 $524,359 $441,614 $373,745
Ratios of expenses to average
net assets...................... 49%(a) .48%(a) .39%(a) .39%(a)
Ratios of net investment income to
average net assets.............. 5.10% 5.18% 5.43% 3.34%
|
Money Market Portfolio
---------------------------------------------------------------------------------------------
For the Period
September 30, 1988
For the For the For the For the (Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
August 31, 1993 August 31, 1992 August 31, 1991 August 31, 1990 August 31, 1989
--------------- --------------- --------------- --------------- -----------------
Net asset value,
beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income............. 0.0304 0.0435 0.0684 0.0810 0.0818
Net gains on securities (both
realized and unrealized)........ -- 0.0007 -- -- --
-------- -------- -------- -------- --------
Total from investment
operations.................. 0.0304 0.0442 0.0684 0.0810 0.0818
-------- -------- -------- -------- --------
Less distributions
Dividends (from net investment
income)......................... (0.0304) (0.0435) (0.0684) (0.0810) (0.0818)
Distributions (from capital
gains).......................... -- (0.0007) -- -- --
-------- -------- -------- -------- --------
Total distributions........... (0.0304) (0.0442) (0.0684) (0.0810) (0.0818)
-------- -------- -------- -------- --------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =========
Total return........................ 3.08% 4.51% 7.06% 8.40% 9.25%(b)
Ratios/Supplemental Data
Net assets, end of period (000) $190,794 $228,079 $138,418 $106,743 $79,656
Ratios of expenses to average
net assets...................... .34%(a) .35%(a) .37%(a) .47%(a) .50%(a)(b)
Ratios of net investment income to
average net assets.............. 3.04% 4.35% 6.84% 8.10% 9.04%(b)
|
(a) Without the waiver of advisory fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been ___%, .64%, .65%, .59%, .60%, .60%, .61%, .61% and .73% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991, and 1990, respectively, and .83% annualized for the period ended August 31, 1989.
(b) Annualized
(c) Financial Highlights relate solely to the Sansom Street Class of Shares within the Portfolio.
Sansom Street Classes
THE SANSOM STREET FAMILY
THE RBB FUND, INC.
Financial Highlights (c)
(For a Share Outstanding Throughout each Period)(d)
Municipal Money Market Portfolio
-----------------------------------------------------------------------------------------
For the Period
September 30, 1988
For the For the For the For the (Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
August 31, 1993 August 31, 1992 August 31, 1991 August 31, 1990 August 31, 1989
--------------- --------------- --------------- --------------- ----------------
Net asset value,
beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ---------- ----------- ----------- -----------
Income from investment operations:
Net investment income............. 0.0233 0.0325 0.0471 0.0559 0.0537
Net gains on securities (both
realized and unrealized)........ -- -- -- -- --
-------- ----------- ------------- ------------- -------------
Total from investment
operations.................. 0.0233 0.0325 0.0471 0.0559 0.0537
-------- ----------- ----------- ----------- -----------
Less distributions
Dividends (from net investment
income)......................... (0.0233) (0.0325) (0.0471) (0.0559) (0.0537)
Distributions (from capital
gains).......................... -- -- -- -- --
-------- ----------- ------------- ------------- -------------
Total distributions........... (0.0233) (0.0325) (0.0471) (0.0559) (0.0537)
-------- ----------- ----------- ----------- -----------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== =========== =========== =========== ===========
Total return........................ 2.35% 3.30% 4.81% 5.74% 5.99%(b)
Ratios/Supplemental Data
Net assets, end of
period (000).................... $ 928 $3,025,781 $15,289,016 $24,781,689 $21,470,715
Ratios of expenses to average
net assets...................... .39%(a) .39%(a) .34%(a) .38%(a) .50%(a)(b)
Ratios of net investment income
to average net assets........... 2.33% 3.25% 4.71% 5.59% 5.93%(b)
|
(a) Without the waiver of advisory, administration, and transfer agency fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Municipal Money Market Portfolio is not reported for the periods ended August 31, 1998, 1997, 1996, 1995 and 1994 and would have been 3.02%, .87%, .73% and .77% for the years ended August 31, 1993, 1992, 1991, and 1990, respectively, and .95% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Sansom Street Class of Shares within the Portfolio.
(d) No Shares of this class had been sold to the public during the periods ended August 31, 1998, 1997, 1996, 1995 and 1994.
Sansom Street Classes
THE SANSOM STREET FAMILY
THE RBB FUND, INC.
Financial Highlights (c)
(For a Share Outstanding Throughout each Period)
Government Obligations Money Market Portfolio
---------------------------------------------------------------------------
For the Period
October 18, 1988
For the For the For the (Commencement
Year Ended Year Ended Year Ended of Operations) to
August 31, 1992(d) August 31, 1991 August 31, 1990 August 31, 1989
------------------ --------------- --------------- ---------------
Net asset value,
beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ----------- ----------- -----------
Income from investment operations:
Net investment income............. 0.0153 0.0699 0.0843 0.0816
Net gains on securities (both
realized and unrealized)........ -- -- -- --
----------- ------------- ------------- -------------
Total from investment
operations.................. 0.0153 0.0699 0.0843 0.0816
----------- ----------- ----------- -----------
Less distributions
Dividends (from net investment
income)......................... (0.0153) (0.0699) (0.0843) (0.0816)
Distributions (from capital
gains).......................... -- -- -- --
----------- ------------- ------------- -------------
Total distributions........... (0.0153) (0.0699) (0.0843) (0.0816)
----------- ----------- ----------- -----------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== ===========
Total return........................ 6.02%(b) 7.23% 8.79% 9.31%(b)
Ratios/Supplemental Data
Net assets, end of
period (000).................... -- $ 125 $ 125 $ 125
Ratios of expenses to average
net assets...................... --(a) --(a) --(a) --(a)
Ratios of net investment income
to average net assets........... 5.85% 6.99% 8.43% 8.91%(b)
|
(a) Without the waiver of advisory, distribution and transfer agency fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Government Obligations Money Market Portfolio is not reported for the periods ended December 4, 1991, August 31, 1991, 1990 and 1989 as no shares of the Sansom Street Class of that Portfolio had been sold to the public during such years.
(b) Annualized.
(c) Financial Highlights relate solely to the Sansom Street Class of Shares within the Portfolio.
(d) This Class of shares ceased operations on December 4, 1991.
Money Market Portfolio
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." There is no assurance that the Portfolio will achieve its investment objective. The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests.
Bank Obligations. The Portfolio may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
Commercial Paper. The Portfolio may purchase commercial paper (I) rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such rating. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
Variable Rate Demand Notes. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there
may be no active secondary market in the notes, the Portfolio will be able (at any time or during specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. Government Obligations. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
Asset-Backed Securities. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods the reinvestment of proceeds by a Portfolio will generally be at lower rates than the rates on the prepaid obligations.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a Portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price
at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Municipal Obligations. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Municipal Obligations."
Guaranteed Investment Contracts. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively, "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two highest rating categories by at least two Rating Organizations ("Rating Organizations") (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P")), (3) securities that
are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations whose issuers are in the same state, (ii) Municipal Obligations the interest on which is paid solely from revenues of similar projects and (iii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects or are issued by issuers located in the same state, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated.
Tax-Exempt Derivative Securities. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon
by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Eligible Securities. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies--Money Market Portfolio--Eligible Securities and "Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities as described under "Investment Objectives and Policies--Money Market Portfolio--Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
Government Obligations Money Market Portfolio
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when
the investment adviser believes that the credit risk with respect thereto is minimal. There is no assurance that the investment objective of the Portfolio will be achieved.
Due to fluctuations in interest rates, the market values of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values.
Repurchase Agreements. The Portfolio may agree to purchase government securities from financial institutions, subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). For a more complete description of repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Repurchase Agreements."
Reverse Repurchase Agreements. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. For a more complete description of reverse repurchase agreements see "Investment Objectives and Policies--Money Market Portfolio--Reverse Repurchase Agreements."
Mortgage-Related and Asset-Backed Securities. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself. The Fund may also acquire asset-backed securities as described under "Investment Objectives and Policies--Money Market Portfolio--Asset-Backed Securities."
Lending of Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities as described under "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
The Money Market, Municipal Money Market and Government Obligations Money Market Portfolios' respective investment objectives and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolios may not, however, change the following investment limitations (except as noted) without such a vote of their respective shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Portfolios may not borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of a Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings in excess of 5% of the Portfolio's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of a Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
The Money Market and Municipal Money Market Portfolios may not:
1. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer
would be owned by a Portfolio, except that up to 25% of the value of a Portfolio's total assets may be invested without regard to such 5% limitation.
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three Business Days (as
defined below). "First Tier Securities" include eligible securities that
(i) if rated by more than one Rating Organization, are rated (at the time
of purchase) by two or more Rating Organizations in the highest rating
category for such securities, (ii) if rated by only one Rating
Organization, are rated by such Rating Organization in its highest rating
category for such securities, (iii) have no short-term rating and are
comparable in priority and security to a class of short-term obligations of
the issuer of such securities that have been rated in accordance with (i)
or (ii) above, or (iv) are Unrated Securities that are determined to be of
comparable quality to such securities. Purchases of First Tier Securities
that come within categories (ii) and (iv) above will be approved or
ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
The Municipal Money Market Portfolio may not:
1. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in obligations at the time of purchase in issuers in the same industry.
In addition, without shareholder approval, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
Purchase Procedures
Sansom Street Shares are sold without a sales load on a continuous basis by the Fund's Distributor. Only Shares of the Sansom Street Class representing interests in the Money Market Portfolio are currently offered to the public. Purchase of Shares may be made through the Banks acting on behalf of their customers, including individuals, trusts, partnerships and corporations who maintain accounts (such as custody, trust or escrow accounts) with the Banks and who have authorized the Bank to invest in the Fund on the customer's behalf. Investors may also purchase Shares through broker-dealers (a "Dealer") that have entered into a dealer agreement with the Fund's Distributor. The minimum initial investment by an investor is $1,500. There is no minimum subsequent investment.
Purchases of Shares may be effected through the customers accounts at the Banks or investor accounts with the Dealer through procedures established in connection with the requirements of accounts at the Banks or at such Dealer. Confirmations of Share purchases and
redemptions will be sent to the Banks or such Dealer. Beneficial ownership of Sansom Street Shares will be recorded by the Banks or such Dealer and reflected in the account statements provided by such Banks or by such Dealer to investors. If you wish to purchase Sansom Street Shares, contact your Bank or a Dealer.
The Banks may also impose minimum customer account requirements. Although the Banks do not impose a sales charge for purchases of Sansom Street Shares, depending upon the terms of the particular customer account, the Banks may charge the account fees for automatic investment and other cash management services. Information concerning these minimum account requirements, services and any charges will be provided by the Banks before the customer authorizes the initial purchase of shares. This Prospectus should be read in conjunction with any information received from the Banks. See "Shareholder Servicing."
The Sansom Street Class of the Money Market Portfolio is also available through Robertson Stephens, a registered broker-dealer that has entered into a dealer Agreement with the Fund's Distributor. For distribution services with respect to that Class of shares of the Portfolio held by this firm, the Fund's Distributor pays Robertson Stephens up to .25% of the average annual daily net asset value of such accounts. Purchases made through this program does not require customers to pay a transaction fee.
Direct Purchases through a Dealer. An investor may make an initial investment by mail by fully completing and signing an application obtained from a Dealer (an "Application") and mailing it, together with a check payable to "Sansom Street Money Market," to "Sansom Street Money Market," c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
The Fund reserves the right to reject any purchase order.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after receipt of the purchase order in good order and Federal Funds are available to the Fund. Purchase orders received after its close of business are priced at the net asset value next determined on the following "Business Day." A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. In those cases in which an investor pays for Shares by check, Federal Funds will generally become available two Business Days after the check is received. Purchase orders for Shares are accepted only on Business Days.
Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in Sansom Street Shares. Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the Securities and Exchange Commission, the Department of Labor or state securities commissions, are urged to consult their legal advisers before investing fiduciary funds in Sansom Street Shares.
Redemption of Shares
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. It is the responsibility of the Banks and the Dealers to transmit promptly to PFPC a customer's redemption request. In the case of shareholders holding share certificates, the certificates must accompany the redemption request. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
Redemption of Shares In an Account for Bank Customers. A customer may
redeem all or part of his Sansom Street Shares in accordance with instructions
and limitations pertaining to his account at the Bank. Redemption orders are
effected at the net asset value per share determined after receipt of the order
by PFPC. Payment for redemption orders received by PFPC on a Business Day before
12:00 noon Eastern Time will be wired the same day in Federal Funds to the
customers account at the Bank, provided that the Fund's custodian is open for
business. If the custodian is not open, payment will be made on the next bank
business day. Payment for redemption orders which are received between 12:00
noon Eastern Time and the close of regular trading on the NYSE (generally 4:00
p.m. Eastern Time) on a Business Day will be wired in Federal Funds to the
customers account on the next bank business day following receipt of the
redemption request. No charge for wiring redemption payments is imposed by the
Fund, although the Banks may charge customer accounts for redemption services.
Redemption of Shares in an Account for Non-Bank Customers. An investor who beneficially owns Shares through an Account may redeem Shares in his account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC from the broker by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading of the NYSE on a Business Day, the redemption will be effective as of the close of regular trading of the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit-balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written request to "Sansom Street Money Market," c/o PFPC, P.O. Box
8950, Wilmington, Delaware 19899. It is recommended that such request be sent by registered or certified mail if share certificates accompany the request. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, a signature guarantee is required. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by calling (888) 261-4073. Neither the Fund, the Portfolios, the Distributor, PFPC nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and the name of the portfolio, all of which must match
the Fund's records; (3) requiring the Fund's service representative to complete
a telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers (other
than the Distributor), financial institutions, securities dealers, financial
planners or other industry professionals, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by an
attorney-in-fact under power of attorney.
The proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization Form that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The
Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors with joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
Other Redemption Information
The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by the Fund's transfer agent of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of redemption proceeds may be delayed for a period up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in a Sansom Street Class involuntarily, on thirty days' notice, if such account falls below $500 and during such thirty-day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the
exception of those holidays on which either the NYSE or the FRB, is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE is closed, as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the proportionate interest of each class in the value of the securities, cash, and other assets of the Portfolio, subtracting accrued and actual liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of the Fund is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
Provident Distributors, Inc. acts as distributor for each of the Sansom Street Classes of the Fund pursuant to a distribution agreement with the Fund dated May 29, 1998 (the "Distribution Agreement"). The Distributor pays for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Portfolios of the Fund as well as for related direct mail, advertising expenses and promotional expenses. The Distributor monitors the support services provided by the Banks as described in "Shareholder Servicing" below.
Distribution Arrangements
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Sansom Street Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Sansom Street Class a distribution fee, which is accrued daily and paid monthly, of up to .20% on an annualized basis of the daily net assets of the relevant Sansom Street Class. The actual amount of such compensation under the Plans is agreed upon by the Fund's Board of Directors and by the Distributor. Under the Distribution Agreement for the Municipal Money Market Portfolio and the
Government Obligations Money Market Portfolio, the Distributor has agreed to accept compensation for its services thereunder and under the relevant Plan in the amount of .05% on an annualized basis. Such compensation may be increased up to the amount permitted under the Plan, with the approval of the Fund's Board of Directors. Under the Distribution Agreement for the Money Market Portfolio, the Distributor has agreed to accept compensation for its services thereunder and under the relevant Plan in the amount of .06% on an annualized basis. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Sansom Street Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Sansom Street Class the fee set forth above. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
The Fund has adopted a Shareholder Servicing Plan on behalf of the Classes under which the Fund may enter into service agreements with the Banks. As compensation for their services under these agreements, the Plan provides that Banks may receive up to .20% (on an annualized basis) of the average daily net asset value of such Shares. The Fund has and will continue to enter into service agreements with the Banks pursuant to which the Banks will render certain support services to customers in consideration for payment of .10% (on an annualized basis) of the average daily net asset value of such Shares. Such services may include aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with PFPC; processing dividend payments from the Fund on behalf of customers; providing information periodically to customers showing their positions in the Sansom Street Classes; providing sub-accounting with respect to the Sansom Street Shares beneficially owned by customers or the information necessary for sub-accounting; and providing certain statistical and factual information. In accordance with the conditions of an exemptive order granted by the Securities and Exchange Commission, each service agreement will provide that a Bank will waive its servicing fee with respect to a Sansom Street Class on any day to the extent necessary to assure that the servicing fee required to be accrued by such Class does not exceed the income of such Class on that day. Customers who are beneficial owners of Sansom Street Shares should read this Prospectus in light of the terms governing their accounts with the Banks. For the fiscal year ended August 31, 1998, the Fund paid PNC Bank shareholder services fees aggregating .10% of the average daily net assets of the Money Market Portfolio under the Plan.
Board of Directors
The business and affairs of the Fund and each investment portfolio are
managed under the direction of the Fund's Board of Directors. The Fund currently
operates or proposes to operate seventeen investment portfolios. Each of the
Sansom Street Classes represents interests in one of the following portfolios:
the Money Market Portfolio, the Municipal Money Market Portfolio and the
Government Obligations Money Market Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $_____ billion of assets, of which approximately $_____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly-owned subsidiary of PNC Bancorp Inc. PNC Bancorp, Inc., is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreements between BIMC and RBB, with respect to the Money Market and Government Obligations Money market Portfolios, respectively, provide for BIMC to also assist generally in supervising the operations of such Portfolios, and to maintain such Portfolios' financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of each of the Money Market and Government Obligations Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of assets in excess of $500 million. For the services provided and expenses assumed by it with respect to the Municipal Money Market Portfolio, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of
the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million. BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
For the fiscal year ended August 31, 1998, the Fund paid investment advisory fees aggregating ____% of the average net assets of the Money Market Portfolio. For the same period BIMC waived approximately ____% of the average net assets of the Money Market Portfolio.
PNC Bank was formerly sub-adviser to the Money Market, Municipal Money Market and Government Obligations Portfolios and provided research, credit analysis and recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC. The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by such Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
Administrator
PFPC serves as the administrator for the Municipal Money Market Portfolios and generally assists the Portfolio in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of the Portfolio. Pursuant to its advisory agreements with the Fund with respect to the Money Market and Government Obligations Money Market Portfolios, BIMC provides administrative services to such Portfolios pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreements. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market and Government Obligations Money Market Portfolios which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolios to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank serves as the Fund's custodian and PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp, serves as the Fund's transfer agent and dividend disbursing agent. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as Distributor of the Shares of each of the Sansom Street Classes of the Fund pursuant to the Distribution Agreement with the Fund on behalf of each of the Sansom Street Classes.
Expenses
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based on the relative net assets of the investment portfolios at the time such expenses were accrued. The Sansom Street Classes of the Fund pay their own distribution fees, and may pay a different share than 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 Sansom Street Classes or if they receive different services.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of lowering yield to investors.
For the fiscal year ended August 31, 1998, the total expenses were ____% of average net assets with respect to the Sansom Street Class of the Money Market Portfolio (not taking into account waivers and reimbursements of ____%). The Sansom Street Classes of the Government Obligations Money Market Portfolio and Municipal Money Market Portfolio did not incur any expenses, as no Shares of such Classes had been sold to the public during the fiscal year ended August 31, 1998.
Banking Laws
Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Act of 1956 or any bank or nonbank affiliate thereof from sponsoring, organizing, controlling, or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from issuing, underwriting, selling or distributing securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of such a customer. PNC Bank, BIMC, PFPC, as well as the Banks, are subject to such banking laws and regulations. In addition, state securities laws on this issue may differ from the interpretations of federal law expressed herein and banks and financial institutions may be required to register as dealers pursuant to state law.
Should future legislative, judicial or administrative action prohibit or restrict the activities of Banks in connection with the provision of support services to their customers, the Fund might be required to alter materially or cause the Fund to discontinue its arrangements with Banks generally and change its method of operations with respect to the Sansom Street Shares. It is not anticipated, however, that any change in the Fund's method of operations would affect its net asset value per share or result in a financial loss to any customer.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Sansom Street Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Money Market Portfolio and the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolio's investments, that a portion of the Portfolio's distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into ___ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market, Municipal Money Market and Government Obligations Money Market Portfolios to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE SANSOM STREET CLASSES OF THE MONEY MARKET, MUNICIPAL MONEY MARKET AND GOVERNMENT OBLIGATIONS MONEY MARKET
PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE SANSOM STREET CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all of the classes of the Fund.
The Fund will issue share certificates for Sansom Street Shares only upon the written request of a shareholder sent to PFPC.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC, the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll free (800) 430-9618.
THE PRINCIPAL CLASS
OF
THE RBB FUND, INC.
MONEY MARKET PORTFOLIO
This Prospectus offers shares of the Principal class of common stock of The RBB Fund, Inc. (the "Fund"). The Principal class represents interests in the Money Market Portfolio (the "Portfolio"), which is a taxable money market portfolio of the Fund.
The investment objective of the Portfolio is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
SHARES OF THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT IN SHARES OF THE PORTFOLIO INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
BlackRock Institutional Management Corporation ("BIMC") serves as investment adviser for the Portfolio, PNC Bank, National Association ("PNC Bank") serves as custodian for the Portfolio and PFPC Inc. ("PFPC") serves as administrator and the transfer and dividend disbursing agent for the Portfolio. Provident Distributors, Inc. (the "Distributor") acts as distributor for the Portfolio.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December _, 1998 has been filed with the Securities and Exchange Commission and is incorporated by reference to this Prospectus. It may be obtained upon request free of charge from the Fund's distributor by calling (800) 888-9723.
PROSPECTUS DECEMBER _, 1998
INTRODUCTION
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The RBB Fund, Inc. is an open-end management investment company
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incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares (the "Principal Shares" or "Shares") offered by this Prospectus represent interests in the Principal class (the "Principal Class") of the Money Market Portfolio.
The MONEY MARKET PORTFOLIO'S investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Portfolio seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolio will be able to maintain a stable net asset value of $1.00 per share.
An investor may purchase and redeem Principal Shares through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in the Principal Shares is subject to certain risks, as set forth in detail under "Investment Objective and Policies." The Portfolio may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objective and Policies."
FEE TABLE
ANNUAL FUND OPERATING EXPENSES (PRINCIPAL CLASS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
The Fee Table below contains a summary of the annual operating expenses of the Principal Class of the Portfolio based on expenses expected to be incurred for the fiscal year ended August 31, 1999, as a percentage of average daily net assets. An example based on the summary is also shown.
Management Fees (after waivers)(1)........................... .23%
12b-1 Fees .................................................. .40%
Other Expenses .................. ........................... .17%
----
Total Fund Operating Expenses (Principal Class)
(after waivers)(1)......................................... .80%
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(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Principal Class, Management Fees would be .37%, and Total Fund Operating Expenses would be .98%.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------ ---------
Money Market Portfolio - Principal Class*.... $8 $26 $44 $99
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* Other classes of the Portfolio are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Principal Class)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Principal Class of the Portfolio will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management -- Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on actual costs and fees charged to the class. The Fee Table reflects a voluntary waiver of Management Fees for the Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolio, such assumption will have the effect of lowering the Portfolio's overall expense ratio and increasing its yield to investors.
From time to time the Portfolio advertises its "yield" and "effective yield." BOTH YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of the Portfolio refers to the income generated by an investment in the Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in the Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment.
The yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The yield on Principal Shares will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in Principal Shares are not reflected in the yields of Principal Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The yield on Principal Shares may differ from yields on shares of other classes that also represent interests in the Portfolio depending on the allocation of expenses to each of the classes. See "Expenses."
The Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Obligations held by the Portfolio have remaining maturities of 397 calendar days or less (exclusive of securities subject to repurchase agreements). The Portfolio is a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Portfolio. See "Eligible Securities." There is no assurance that the investment objective of the Portfolio will be achieved. The following descriptions illustrate the types of Money Market Instruments in which the Portfolio invests.
BANK OBLIGATIONS. The Portfolio may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
COMMERCIAL PAPER. The Portfolio may purchase commercial paper rated (at the time of purchase) in the two highest rating categories of a nationally recognized statistical rating organization ("Rating Organization"). These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
VARIABLE RATE DEMAND NOTES. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. GOVERNMENT OBLIGATIONS. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
ASSET-BACKED SECURITIES. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by the Portfolio will generally be at lower rates than the rates on the prepaid obligations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by the Portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the repurchase price which the Portfolio is obligated to pay. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
GUARANTEED INVESTMENT CONTRACTS. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively, "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
MUNICIPAL OBLIGATIONS. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality.
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
WHEN-ISSUED SECURITIES. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
ELIGIBLE SECURITIES. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two highest rating categories by one or more Rating Organizations (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, and (4) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated
securities. For a more complete description of eligible securities, see "Investment Objective and Policies" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objective and Policies -- Illiquid Securities" in the Statement of Additional Information.
YEAR 2000. The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revet to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying systems will not impair services to the Fund at that time.
The Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the following investment limitations without such a vote of its shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objective and Policies.")
The Portfolio may not:
1. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
2. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the
value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such 5% limitation.
3. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
4. Purchase any securities which would cause, at the time of
purchase, less than 25% of the value of the total assets of the Portfolio to be
invested in the obligations of issuers in the banking industry, or in
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obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Portfolio.
1. The Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three Business Days (as defined below). "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization, are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
PURCHASE PROCEDURES
GENERAL. Principal Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Principal Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $25,000 and the minimum subsequent investment is $2,500. The Fund in its sole discretion may accept or reject any order for purchases of Principal Shares.
All payments for initial and subsequent investments should be in U.S. dollars. The brokerage firm which carries the Account (the "Broker") is responsible for the prompt transmission of the order to the Fund's transfer agent. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases
where payment is made by check, Federal Funds will generally become available two Business Days after the check is received by the Broker. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by PFPC after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by PFPC as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
PURCHASES THROUGH AN ACCOUNT. Purchases of Shares may be effected through an investor's Account with his Broker through procedures established in connection with the requirements of Accounts at such Broker. The minimum initial and subsequent investment in Shares are determined by your Broker. In such event, beneficial ownership of Shares will be recorded by the Broker and will be reflected in the Account statements provided by the Broker to such investors. A Broker may impose minimum investment Account requirements. Even if a Broker does not impose a sales charge for purchases of Shares, depending on the terms of an investor's Account with his Broker, the Broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's Broker, and this Prospectus should be read in conjunction with any information received from a Broker. Shareholders whose shares are held in the street name account of a Broker and who desire to transfer such shares to the street name account of another Broker should contact their current Broker.
A Broker may offer investors maintaining Accounts the ability to purchase Shares under an automatic purchase program (a "Purchase Program") established by a participating Broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Principal Shares. The frequency of investments and the minimum investment requirement will be established by the Broker and the Fund. In addition, the Broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular Broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the Broker.
If a Broker makes special arrangements under which orders for Principal Shares are received by PFPC prior to 12:00 noon Eastern Time, and the Broker guarantees that payment for such Shares will be made in available Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
DIRECT PURCHASES. An investor may also make direct investments at any time in Principal Shares through any Broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor also may make an initial investment in Principal Shares by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Money Market Portfolio, and mailing it, together with a check payable to "THE PRINCIPAL CLASS" to THE PRINCIPAL CLASS, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $5,000, an investor may also purchase Principal Shares by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for
this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800)533-7719 (in Delaware call collect (302) 791-1196), and provide your name, address, telephone number, Social Security or Tax Identification Number, specify the Principal Class, the amount being wired, and by which bank or Dealer. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, PA
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (Money Market Portfolio) AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
RETIREMENT PLANS. Principal Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your Broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
REDEMPTION PROCEDURES
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
REDEMPTION OF SHARES IN AN ACCOUNT. An investor who beneficially owns Principal Shares through an Account may redeem Principal Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his Broker. It is the responsibility of the Broker to transmit purchase and redemption orders to PFPC and to credit its investors' accounts with the redemption proceeds on a timely basis. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
A Broker may also redeem each day a sufficient number of Shares of the Primary Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each Broker reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
REDEMPTION OF SHARES OWNED DIRECTLY. A direct investor may redeem any number of Shares by sending a written request to THE PRINCIPAL CLASS c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by calling (888) 261-4073. Neither the Fund, the Distributor, the Portfolio, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers (other
than the Distributor), financial institutions, securities dealers, financial
planners or other industry professionals, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by
attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization Form that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next day that a wire transfer can be effected. The minimum redemption for proceeds sent by wire transfer is $5,000. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
REDEMPTION BY CHECK. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100: however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check
redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares equaling the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or to obtain cash at other banks.
ADDITIONAL REDEMPTION INFORMATION. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in the Principal Class involuntarily, on thirty days' notice, if such account falls below $1,500 and during such 30-day notice period the amount invested in such account is not increased to at least $1,500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
The net asset value per share of the Principal Class of the Portfolio for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of the Principal Class of the Portfolio is calculated by adding the proportionate interest of each class in the value of the securities, cash and other assets of the Portfolio, subtracting the actual and accrued liabilities of the Principal Class and dividing the result by the number of outstanding shares of the class. The net asset value per share of the Portfolio is determined independently of any of the Fund's other investment portfolios.
The Fund seeks to maintain for the Portfolio a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, the Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
BOARD OF DIRECTORS
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen investment portfolios. The Principal Class represents interests in the Money Market Portfolio.
INVESTMENT ADVISER
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for the Portfolio. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. BIMC and its predecessors have been in the business of managing the investments of fiduciary and other accounts in the Philadelphia area since 1847. BIMC currently manages over $___ billion of assets, of which approximately $___ billion are mutual funds.
As investment adviser to the Portfolio, BIMC manages the Portfolio and is responsible for all purchases and sales of portfolio securities. BIMC also provides research and credit analysis. In entering into Portfolio transactions for the Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Portfolio, subject to the requirements of best execution. The agreement between BIMC and RBB with respect to the Money Market Portfolio provides for BIMC to also assist generally in supervising the operations of the Portfolio, and to maintain the Portfolio's financial accounts and records. These administrative responsibilities have been delegated to PFPC, as further described below.
For the services provided to and expenses assumed by it for the benefit of the Portfolio, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the Fund's fiscal year ended August 31, 1998, the Fund paid investment advisory fees aggregating ___% of the average net assets of the Portfolio, and BIMC waived advisory fees aggregating ___% of the average net assets of the Portfolio.
PNC Bank was formerly sub-adviser to the Money Market Portfolio and provided research, credit analysis and recommendations with respect to the Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolio to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company".
ADMINISTRATOR
PFPC provides administration and accounting services to the Portfolio as a delegate of BIMC under the advisory agreement. The Fund has agreed to pay directly to PFPC the fees for administration and accounting services to the Money Market Portfolio which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by the Portfolio to BIMC. Pursuant to the delegation PFPC is entitled to receive an administration fee, computed daily, and payable monthly at the annual rate of .10% of the average daily net assets of the Portfolio. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND CUSTODIAN
PNC Bank serves as the Fund's custodian and PFPC, an indirect wholly owned subsidiary of PNC Bank Corp., serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with Dealers for the provision of certain shareholder support services to customers of such Dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
DISTRIBUTOR
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as Distributor of the Principal Shares pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
EXPENSES
The expenses of the Portfolio are deducted from the total income of the Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. The Principal Class of the Fund pays its own distribution fees and may pay a different share than 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 Principal Class or if it receives different services.
The investment adviser may assume expenses of the Portfolio from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios 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 Portfolio's expense ratio and of lowering yield to investors.
The Board of Directors of the Fund approved and adopted the Distribution Agreement and Plan of Distribution for the Principal Class (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Principal Class a distribution fee, which is accrued daily and paid monthly, of up to .50% on an annualized basis of the average daily net assets of the Principal Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plan in the amount of .45% of the average daily net assets of the Principal Class on an annualized basis in any year. The Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and Plan, the Distributor may re-allocate an amount up to the full fee that it receives to financial institutions, including broker/dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of the Principal Class serviced by such financial institutions. The Distributor may also reimburse broker/dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or broker/dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Principal Class the fee agreed to under the Distribution Agreement. Payments under the Plan are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Principal Class of the Portfolio to the shareholders of the Principal Class. All distributions are reinvested in the form of additional full and fractional Principal Shares unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by the Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of trading of the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
Distributions from the Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified into ___ different classes of Common Stock ( see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in its Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within the Portfolio varies based upon the services provided, which may affect performance. Each class of Common Stock of the Fund that has a Rule 12b-1 distribution plan has a separate plan for the class. Under the Distribution Agreement entered into with the Distributor and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in the Portfolio. An investor may contact the Fund's distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATES SOLELY TO THE PRINCIPAL CLASS OF THE MONEY MARKET
PORTFOLIO AND DESCRIBES ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE PRINCIPAL CLASS OF THE MONEY MARKET PORTFOLIO.
Each share that represents an interest in the Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in the Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of the Portfolio will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ____________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all of the classes of the Fund.
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
CONTENTS
PAGE
INTRODUCTION...............................................
FINANCIAL HIGHLIGHTS.......................................
INVESTMENT OBJECTIVES AND POLICIES......................... INVESTMENT LIMITATIONS..................................... PURCHASE AND REDEMPTION OF SHARES..........................
NET ASSET VALUE............................................
MANAGEMENT................................................. DISTRIBUTION OF SHARES.....................................
DIVIDENDS AND DISTRIBUTIONS................................ TAXES .................................................. DESCRIPTION OF SHARES...................................... OTHER INFORMATION..........................................
INVESTMENT ADVISER
BlackRock Institutional Management Corporation
Wilmington, Delaware
CUSTODIAN
PNC Bank, National Association
Philadelphia, Pennsylvania
ADMINISTRATOR AND TRANSFER AGENT
PFPC Inc.
Wilmington, Delaware
COUNSEL
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
[ ]
PROSPECTUS
THE PRINCIPAL CLASS
MONEY MARKET PORTFOLIO
DECEMBER __, 1998
Prospectus
THE BETA FAMILY
Municipal
Money Market Portfolio
December __, 1998
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 INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
INTRODUCTION..................................................................
FINANCIAL HIGHLIGHTS..........................................................
INVESTMENT OBJECTIVES AND POLICIES............................................ YEAR 2000..................................................................... PURCHASE AND REDEMPTION OF SHARES.............................................
NET ASSET VALUE...............................................................
MANAGEMENT.................................................................... DISTRIBUTION OF SHARES........................................................
DIVIDENDS AND DISTRIBUTIONS................................................... TAXES......................................................................... DESCRIPTION OF SHARES......................................................... OTHER INFORMATION.............................................................
Investment Adviser BlackRock Institutional Management Corporation Wilmington, Delaware
Custodian PNC Bank, National Association Philadelphia, Pennsylvania
Administrator and Transfer Agent PFPC Inc. Wilmington, Delaware
Counsel Drinker Biddle & Reath LLP Philadelphia, Pennsylvania
Independent Accountants
THE BETA FAMILY
of
The RBB Fund, Inc.
The Beta Family consists of four classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares of the three classes (collectively, the "Beta Shares" or "Shares") offered by this Prospectus represent interests in a municipal money market portfolio, a U.S. Government obligations money market portfolio and a New York municipal money market portfolio (together, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
Municipal Money Market Portfolio -- to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Government Obligations Money Market Portfolio -- to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
New York Municipal Money Market Portfolio -- to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is exempt from regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes.
The New York Municipal Money Market Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. An investment in the Portfolios is neither insured nor guaranteed by the U.S. Government or any governmental agency. There can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
An investor may purchase and redeem Shares of any of the Beta classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
BlackRock Institutional Management Corporation ("BIMC") serves as investment adviser for the Portfolios and PNC Bank, National Association ("PNC Bank") serves as custodian for the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund's distributor by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
INTRODUCTION
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and is currently operating or proposing to operate seventeen separate investment portfolios. Each of the three classes of the Fund's shares (collectively, the "Beta Classes") offered by this Prospectus represents interests in one of the following investment portfolios: The Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Municipal Money Market and Government Obligations Money Market Portfolios are diversified investment portfolios; the New York Municipal Money Market Portfolio is a non-diversified investment portfolio.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is Tax-Exempt Interest and is exempt from New York State and New York City personal income taxes and which meet certain ratings criteria and present minimal credit risks.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the Beta Classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the Beta Classes is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Any or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
Estimated Annual Fund Operating Expenses (Beta Classes)
(as a percentage of average daily net assets)
The Fee Table below contains a summary of the annual operating expenses of the Beta Classes based on expenses expected to be incurred for the current fiscal period, as a percentage of average daily net assets. An example based on the summary is also shown.
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
Management Fees (after
waivers)(1)................................ .04% .30% .02%
12b-1 Fees(1)................................ .56% .56% .52%
Other Expenses............................... .25% .12% .28%
---- ---- ----
Total Fund Operating Expenses (after
waivers)(1)................................ .85% .98% .80%
==== ==== ====
|
Example
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Municipal Money Market*................................. $ 9 $27 $47 $105
Government Obligations Money Market*.................... $10 $31 $54 $120
New York Municipal Money Market*........................ $ 8 $25 $44 $ 99
|
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Beta Classes)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Beta Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management - - Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on estimated costs and estimated fees expected to be charged to the Beta Classes, taking into account anticipated fee waivers and reimbursements. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Each of the Municipal Money Market Portfolio's and the New York Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate and by increasing the New York Municipal Money Market Portfolio's yield
(calculated as above) by the amount necessary to reflect the payment of federal, New York State and New York City personal income taxes at stated rates.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of any of the Beta Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in the Beta Classes are not reflected in the total return and yields of the Beta Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Beta Classes may differ from total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
FINANCIAL HIGHLIGHTS
No financial data is supplied for the Portfolios because, as of the date of this Prospectus, the Portfolios had no performance history.
INVESTMENT OBJECTIVES AND POLICIES
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may
be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of
its net assets in (i) Municipal Obligations whose issuers are in the same state,
(ii) Municipal Obligations the interest on which is paid solely from revenues of
similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest,
it does not currently intend to do so on a regular basis. To the extent the
Municipal Money Market Portfolio's assets are concentrated in Municipal
Obligations that are payable from the revenues of similar projects or are issued
by issuers located in the same state, the Portfolio will be subject to the
peculiar risks presented by the laws and economic conditions relating to such
states or projects to a greater extent than it would be if its assets were not
so concentrated.
Tax-Exempt Derivative Securities. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two (2) highest rating categories by at least two Rating Organizations (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Rating Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4)
securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies - - Illiquid Securities" in the Statement of Additional Information.
The Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Municipal Money Market Portfolio may not:
1. Purchase the securities of any issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to this 5% limitation.
2. Borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio
securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in the obligations at the time of purchase of issuers in the same industry.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal. There is no assurance that the investment objective of the Portfolio will be achieved.
Due to fluctuations in interest rates, the market value of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Mortgage-Related Securities. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself. The Portfolio may also acquire asset-backed securities. Asset-backed securities are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's
total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
Lending of Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
The Government Obligations Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The following investment limitations may not be changed, however, without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment
leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of Portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
New York Municipal Money Market Portfolio
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. During periods of normal market conditions, at least 80% of the assets will be invested in Municipal Obligations, the interest on which is Tax-Exempt Interest and which meet certain ratings criteria and present minimal credit risks to the Portfolio. Portfolio obligations held by the New York Municipal Money Market Portfolio will have remaining maturities of 397 days or less ("short-term" obligations). Dividends paid by the Portfolio which are derived from interest attributable to tax-exempt obligations of the State of New York and its political subdivisions, as well as of certain other governmental issuers such as Puerto Rico ("New York Municipal Obligations"), will be excluded from gross income for federal income tax purposes and exempt from New York State and New York City personal income taxes, but will be subject to corporate franchise taxes. Dividends derived from interest on tax-exempt obligations of other governmental issuers will be excluded from gross income for federal income tax purposes, but will be subject to New York State and New York City personal income taxes. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, at least 65% of the Fund's assets will be invested in New York Municipal Obligations. There is no assurance that the investment objective of the New York Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Municipal Obligations."
Up to 20% of the Portfolio's assets may be invested in Alternative Minimum Tax Securities. Investors should be aware of the possibility of federal, state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (ii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the New York Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated. The Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Tax-Exempt Derivative Securities. The New York Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. For a description of such securities, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Tax-Exempt Derivative Securities."
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies - Municipal Money Market Portfolio -- When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Stand-By Commitments."
Taxable Investments. The Portfolio may for defensive or other purposes invest in certain short-term taxable securities when the Portfolio's investment adviser believes that it would be in the best interests of the Portfolio's investors to do so. Taxable securities in which the Portfolio may invest on a short-term basis are obligations of the U.S. Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by Moody's Investors Service, Inc. ("Moody's") or S&P; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. At no time will more than 20% of the Portfolio's total assets be invested in taxable short-term securities unless the Portfolio's investment adviser has determined to temporarily adopt a defensive investment policy in the face of an anticipated softening in the market for Municipal Obligations in general.
Eligible Securities. The New York Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines. For a more complete description of eligible securities, see "Investment Objectives and Policies - Municipal Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
Special Considerations. As a non-diversified investment company, the Portfolio may invest a greater proportion of its assets in the obligations of a smaller number of issuers relative to a diversified portfolio. As a result, the value of a non-diversified investment portfolio will fluctuate to a greater
degree upon changes in the value of each underlying security than a diversified portfolio. In the opinion of the Portfolio's investment adviser, any risk to the Portfolio should be limited by its intention to continue to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended, and by its policies restricting investments to obligations with short-term maturities and obligations which qualify as eligible securities.
The Portfolio's ability to meet its investment objective is dependent upon the ability of issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest on their securities. New York State and New York City face long-term worsening economic problems, which could seriously affect their ability and that of other issuers of New York Municipal Obligations to meet their financial obligations.
Investors should be aware that certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Portfolio) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowing abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and lower market prices for their outstanding debt obligations. Although several different issues of municipal securities of New York State and its agencies and instrumentalities and of New York City have been downgraded by S&P and Moody's in recent years, the most recent actions of S&P and Moody's have been to place the debt obligation of New York State and New York City on CreditWatch with positive implications and to upgrade the debt obligations of New York City, respectively. Strong demand for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by such issuers could result in defaults or declines in the market values of their existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although no issuers of New York Municipal Obligations were as of the date of this Prospectus in default with respect to the payment of their debt obligations, the occurrence of any such default could adversely affect the market values and marketability of all New York Municipal Obligations and, consequently, the net asset value of the Portfolio's shares. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
The New York Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The New York Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of
shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The New York Municipal Money Market Portfolio may not:
1. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
2. Purchase any securities which would cause 25% or more of the value of the Portfolio's total assets at the time of purchase to be invested in the securities of issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York
State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
YEAR 2000
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
PURCHASE AND REDEMPTION OF SHARES
Purchase Procedures
General. Beta Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Beta Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Beta Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally
4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
Purchases through an Account. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Beta Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Beta Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker.
Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Beta Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares of the Beta Class designated by the investor as the "Primary Beta Class" for his Purchase Program. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker. A participant in a Purchase Program may change the designation of the Primary Beta Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Beta Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made available in Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
Direct Purchases. An investor may also make direct investments at any time in any Beta Class he selects through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment in any of the Beta Classes by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Portfolio in which he wishes to invest, and mailing it, together with a check payable to "The Beta Family" to the Beta Family, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The check must specify the name of the Portfolio for which
shares are being purchased. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares in any of the Beta Classes by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 447-1139 (in Delaware call collect (302) 791-1149), and provide your name, address, telephone number, Social Security or Tax Identification Number, the Beta Class selected, the amount being wired, and by which bank or Dealer. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, Pa.
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number
with the Portfolio)
FOR PURCHASE OF: (name of the Portfolio)
AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Retirement Plans. Beta Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption Procedures
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
Redemption of Shares in an Account. An investor who beneficially owns Beta Shares in an Account may redeem Beta Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares of the Primary Beta Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written request, together with any share certificates issued to the investor, to The Beta Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by calling (888) 261-4073. Neither the Fund, the Distributor, the Portfolios, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following measures:
(1) requiring the appropriate telephone transaction privilege forms; (2)
requiring the caller to provide the names of the account owners, the account
social security number and name of the Portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (5) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) business days of the call; and (6) maintaining tapes of telephone transactions for six months, if the fund elects to record shareholder telephone transactions. For accounts held of record by a broker-dealer, financial institutions, securities dealers, financial planners, trustee, custodian other than the Distributor or other agent, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
Additional Redemption Information. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire
payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in an Beta Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
NET ASSET VALUE
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the value of the proportionate interest of each class in the securities, cash, and other assets of the Portfolio, subtracting the accrued and actual liabilities of the class and dividing the result by the number of its shares outstanding of the class. The net asset value per share of each class is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
MANAGEMENT
Board of Directors
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. Each of the Beta Classes represents interests in one of the following investment portfolios: the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreement between BIMC and RBB with respect to the Government Obligations Money Market Portfolio provides for BIMC to also assist generally in supervising the operations of such Portfolio, and to maintain the Portfolio's financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of the Government Obligations Money Market Portfolio, BIMC is entitled to receive the following fee, computed daily and payable monthly based on the Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the services provided and expenses assumed by it with respect to the Municipal Money Market and New York Municipal Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
PNC Bank was formerly sub-adviser to the Municipal Money Market and Government Obligations Portfolios and provided research, credit analysis and
recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC. The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
BIMC may in its discretion from time-to-time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
Administrator
PFPC serves as the administrator for the Municipal Money Market and New York Municipal Money Market Portfolios and generally assists those Portfolios in all aspects of their administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of each of these Portfolios. Pursuant to its advisory agreement with the Fund with respect to the Government Obligations Portfolio, BIMC provides administrative services to such Portfolio pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreement. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Government Obligations Portfolio which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolio to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank serves as the Fund's custodian and PFPC also serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support services to customers of such broker/dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor of the Shares of each of the Beta Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. In addition, distribution expenses, transfer agency expenses, expenses of preparing, printing and distributing prospectuses, statements of additional information, proxy statements and reports to shareholders, and registration fees identified as belonging to a particular class, are allocated to such class.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of decreasing yield to investors.
DISTRIBUTION OF SHARES
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Beta Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Beta Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net
assets of the relevant Beta Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Beta Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Beta Class the fee agreed to under the Distribution Agreement. Payments under the plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Beta Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
TAXES
Distributions from the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolios' investments, that a portion of the Portfolios' distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
Exempt interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income (but not corporate franchise) taxes. The New York Municipal Money Market Portfolio will determine annually the percentage amounts exempt from New York State and New York City personal income taxes, and the amounts, if any, subject to such taxes. The exclusion or exemption of interest income for federal income tax purposes, or New York State or New York City personal income tax purposes, in most cases does not result in an exemption under the tax laws of any other state or local authority.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BETA CLASSES OF THE MUNICIPAL MONEY MARKET, GOVERNMENT OBLIGATIONS MONEY MARKET AND NEW YORK MUNICIPAL MONEY MARKET
PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE BETA CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________ 1998 to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
The Fund will issue share certificates for any of the Beta Shares only upon the written request of a shareholder sent to PFPC.
OTHER INFORMATION
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
Prospectus
THE GAMMA FAMILY
December __, 1998
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 INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
FINANCIAL HIGHLIGHTS...................................................
INVESTMENT OBJECTIVES AND POLICIES.....................................
YEAR 2000.............................................................. PURCHASE AND REDEMPTION OF SHARES......................................
NET ASSET VALUE........................................................
MANAGEMENT............................................................. DISTRIBUTION OF SHARES.................................................
DIVIDENDS AND DISTRIBUTIONS............................................ TAXES.................................................................. DESCRIPTION OF SHARES.................................................. OTHER INFORMATION......................................................
Investment Adviser
BlackRock Institutional Management Corporation
Wilmington, Delaware
Custodian
PNC Bank, National Association
Philadelphia, Pennsylvania
Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants
THE GAMMA FAMILY
of
The RBB Fund, Inc.
The Gamma Family consists of four classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares of the three classes (collectively, the "Gamma Shares" or "Shares") offered by this Prospectus represent interests in a municipal money market portfolio, a U.S. Government obligations money market portfolio and a New York municipal money market portfolio (together, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
Municipal Money Market Portfolio -- to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Government Obligations Money Market Portfolio -- to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
New York Municipal Money Market Portfolio -- to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is exempt from regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes.
The New York Municipal Money Market Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. An investment in the Portfolios is neither insured nor guaranteed by the U.S. Government or any governmental agency. There can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
An investor may purchase and redeem Shares of any of the Gamma classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
BlackRock Institutional Management Corporation ("BIMC") serves as investment adviser for the Portfolios and PNC Bank, National Association ("PNC Bank") serves as custodian for the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund's distributor by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
INTRODUCTION
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and is currently operating or proposing to operate seventeen separate investment portfolios. Each of the three classes of the Fund's shares (collectively, the "Gamma Classes") offered by this Prospectus represents interests in one of the following investment portfolios: The Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Municipal Money Market and Government Obligations Money Market Portfolios are diversified investment portfolios; the New York Municipal Money Market Portfolio is a non-diversified investment portfolio.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is Tax-Exempt Interest and is exempt from New York State and New York City personal income taxes and which meet certain ratings criteria and present minimal credit risks.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the Gamma Classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the Gamma Classes is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Any or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
Estimated Annual Fund Operating Expenses (Gamma Classes)
(as a percentage of average daily net assets)
The Fee Table below contains a summary of the annual operating expenses of the Gamma Classes based on expenses expected to be incurred for the current fiscal period, as a percentage of average daily net assets. An example based on the summary is also shown.
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market
Portfolio Portfolio Portfolio
------------ ------------ ------------
Management Fees (after
waivers)(1)........................... .04% .30% .02%
12b-1 Fees(1)........................... .56% .56% .52%
Other Expenses.......................... .25% .12% .28%
---- ---- ----
Total Fund Operating
Expenses
(after waivers)(1).................... .85% .98% .80%
==== ==== ====
|
(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio, Management Fees would be .33%, .41% and .35%, respectively, and Total Fund Operating Expenses would be 1.14%, 1.09% and 1.13%, respectively.
Example
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Municipal Money Market*................................. $ 9 $27 $47 $105
Government Obligations Money Market*.................... $10 $31 $54 $120
New York Municipal Money Market*........................ $ 8 $25 $44 $ 99
|
* Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Gamma Classes)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Gamma Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management -- Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on estimated costs and estimated fees expected to be charged to the Gamma Classes, taking into account anticipated fee waivers and reimbursements. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Each of the Municipal Money Market Portfolio's and the New York Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate and by increasing the New York Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal, New York State and New York City personal income taxes at stated rates.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of any of the Gamma Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in the Gamma Classes are not reflected in the total return and yields of the Gamma Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Gamma Classes may differ from total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
FINANCIAL HIGHLIGHTS
No financial data is supplied for the Portfolios because, as of the date of this Prospectus, the Portfolios had no performance history.
INVESTMENT OBJECTIVES AND POLICIES
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of
its net assets in (i) Municipal Obligations whose issuers are in the same state,
(ii) Municipal Obligations the interest on which is paid solely from revenues of
similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest,
it does not currently intend to do so on a regular basis. To the extent the
Municipal Money Market Portfolio's assets are concentrated in Municipal
Obligations that are payable from the revenues of similar projects or are issued
by issuers located in the same state, the Portfolio will be subject to the
peculiar risks presented by the laws and economic conditions relating to such
states or projects to a greater extent than it would be if its assets were not
so concentrated.
Tax-Exempt Derivative Securities. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two (2) highest rating categories by at least two Rating Organizations (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Rating Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
The Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Municipal Money Market Portfolio may not:
1. Purchase the securities of any issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to this 5% limitation.
2. Borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in the obligations at the time of purchase of issuers in the same industry.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal. There is no assurance that the investment objective of the Portfolio will be achieved.
Due to fluctuations in interest rates, the market value of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Mortgage-Related Securities. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself. The Portfolio may also acquire asset-backed securities. Asset-backed securities are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
Lending of Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
The Government Obligations Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The following investment limitations may not be changed, however, without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of Portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
New York Municipal Money Market Portfolio
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. During periods of normal market conditions, at least 80% of the assets will be invested in Municipal Obligations, the interest on which is Tax-Exempt Interest and which meet certain ratings criteria and present minimal credit risks to the Portfolio. Portfolio obligations held by the New York Municipal Money Market Portfolio will have remaining maturities of 397 days or less ("short-term" obligations). Dividends paid by the Portfolio which are derived from interest attributable to tax-exempt obligations of the State of New York and its political subdivisions, as well as of certain other governmental issuers such as Puerto Rico ("New York Municipal Obligations"), will be excluded from gross income for federal income tax purposes and exempt from New York State and New York City personal income taxes, but will be subject to corporate franchise taxes. Dividends derived from interest on tax-exempt obligations of other governmental issuers will be excluded from gross income for federal income tax purposes, but will be subject to New York State and New York City personal income taxes. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, at least 65% of the Fund's assets will be invested in New York Municipal Obligations. There is no assurance that the investment objective of the New York Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Municipal Obligations."
Up to 20% of the Portfolio's assets may be invested in Alternative Minimum Tax Securities. Investors should be aware of the possibility of federal, state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (ii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the New York Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated. The Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Tax-Exempt Derivative Securities. The New York Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. For a description of such securities, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Tax-Exempt Derivative Securities."
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies -- Municipal Money Market Portfolio -- When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Stand-By Commitments."
Taxable Investments. The Portfolio may for defensive or other purposes invest in certain short-term taxable securities when the Portfolio's investment adviser believes that it would be in the best interests of the Portfolio's investors to do so. Taxable securities in which the Portfolio may invest on a short-term basis are obligations of the U.S. Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by Moody's Investors Service, Inc. ("Moody's") or S&P; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. At no time will more than 20% of the Portfolio's total assets be invested in taxable short-term securities unless the Portfolio's investment adviser has determined to temporarily adopt a defensive investment policy in the face of an anticipated softening in the market for Municipal Obligations in general.
Eligible Securities. The New York Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines. For a more complete description of eligible securities, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
Special Considerations. As a non-diversified investment company, the Portfolio may invest a greater proportion of its assets in the obligations of a smaller number of issuers relative to a diversified portfolio. As a result, the value of a non-diversified investment portfolio will fluctuate to a greater degree upon changes in the value of each underlying security than a diversified portfolio. In the opinion of the Portfolio's investment adviser, any risk to the Portfolio should be limited by its intention to continue to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended, and by its policies restricting investments to obligations with short-term maturities and obligations which qualify as eligible securities.
The Portfolio's ability to meet its investment objective is dependent upon the ability of issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest on their securities. New York State and New York City face long-term worsening economic problems, which could seriously affect their ability and that of other issuers of New York Municipal Obligations to meet their financial obligations.
Investors should be aware that certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Portfolio) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowing abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and lower market prices for their outstanding debt obligations. Although several different issues of municipal securities of New York State and its agencies and instrumentalities and of New York City have been downgraded by S&P and Moody's in recent years, the most recent actions of S&P and Moody's have been to place the debt obligation of New York State and New York City on CreditWatch with positive implications and to upgrade the debt obligations of New York City, respectively. Strong demand for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by such issuers could result in defaults or declines in the market values of their existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although no issuers of New York Municipal Obligations were as of the date of this Prospectus in default with respect to the payment of their debt obligations, the occurrence of any such default could adversely affect the market values and marketability of all New York Municipal Obligations and, consequently, the net asset value of the Portfolio's shares. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Municipal Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies -- Illiquid Securities" in the Statement of Additional Information.
The New York Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The New York Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The New York Municipal Money Market Portfolio may not:
1. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
2. Purchase any securities which would cause 25% or more of the value of the Portfolio's total assets at the time of purchase to be invested in the securities of issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
YEAR 2000
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
PURCHASE AND REDEMPTION OF SHARES
Purchase Procedures
General. Gamma Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Gamma Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Gamma Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which
payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
Purchases through an Account. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Gamma Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Gamma Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker.
Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Gamma Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares of the Gamma Class designated by the investor as the "Primary Gamma Class" for his Purchase Program. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker. A participant in a Purchase Program may change the designation of the Primary Gamma Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Gamma Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made available in Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
Direct Purchases. An investor may also make direct investments at any time in any Gamma Class he selects through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment in any of the Gamma Classes by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Portfolio in which he wishes to invest, and mailing it, together with a check payable to "The Gamma Family" to the Gamma Family, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The check must specify the name of the Portfolio for which shares are being purchased. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares in any of the Gamma Classes by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 447-1139 (in Delaware call collect (302) 791-1149), and provide your name, address, telephone number, Social Security or Tax Identification Number, the Gamma Class selected, the amount being wired, and by which bank or Dealer. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, Pa.
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of the Portfolio) AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Retirement Plans. Gamma Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption Procedures
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
Redemption of Shares in an Account. An investor who beneficially owns Gamma Shares in an Account may redeem Gamma Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares of the Primary Gamma Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written request, together with any share certificates issued to the investor, to The Gamma Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by calling (888) 261-4073. Neither the Fund, the Distributor, the Portfolios, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following the procedures below or for following instructions communicated by telephone that they reasonably believe to be genuine.
The Fund's telephone transaction procedures include the following measures:
(1) requiring the appropriate telephone transaction privilege forms; (2)
requiring the caller to provide the names of the account owners, the account
social security number and name of the Portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the fund elects to record shareholder
telephone transactions. For accounts held of record by a broker-dealer,
financial institutions, securities dealers, financial planners, trustee,
custodian other than the Distributor or other agent, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by
attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
Additional Redemption Information. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in an Gamma Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
NET ASSET VALUE
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the value of the proportionate interest of each class in the securities, cash, and other assets of the Portfolio, subtracting the accrued and actual liabilities of the class and dividing the result by the number of its shares outstanding of the class. The net asset value per share of each class is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
MANAGEMENT
Board of Directors
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. Each of the Gamma Classes represents interests in one of the following investment portfolios: the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreement between BIMC and RBB with respect to the Government Obligations Money Market Portfolio provides for BIMC to also assist generally in supervising the operations of such Portfolio, and to maintain the Portfolio's financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of the Government Obligations Money Market Portfolio, BIMC is entitled to receive the following fee, computed daily and payable monthly based on the Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million. For the services provided and expenses assumed by it with respect to the Municipal Money Market and New York Municipal Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
PNC Bank was formerly sub-adviser to the Municipal Money Market and Government Obligations Portfolios and provided research, credit analysis and recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC. The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
BIMC may in its discretion from time-to-time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
Administrator
PFPC serves as the administrator for the Municipal Money Market and New York Municipal Money Market Portfolios and generally assists those Portfolios in all aspects of their administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of each of these Portfolios. Pursuant to its advisory agreement with the Fund with respect to the Government Obligations Portfolio, BIMC provides administrative services to such Portfolio pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreement. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Government Obligations Portfolio which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolio to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank serves as the Fund's custodian and PFPC also serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support services to customers of such broker/dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor of the Shares of each of the Gamma Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. In addition, distribution expenses, transfer agency expenses, expenses of preparing, printing and distributing prospectuses, statements of additional information, proxy statements and reports to shareholders, and registration fees identified as belonging to a particular class, are allocated to such class.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of decreasing yield to investors.
DISTRIBUTION OF SHARES
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Gamma Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Gamma Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net assets of the relevant Gamma Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Gamma Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Gamma Class the fee agreed to under the Distribution Agreement. Payments under the plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Gamma Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
TAXES
Distributions from the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolios' investments, that a portion of the Portfolios' distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
Exempt interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income (but not corporate franchise) taxes. The New York Municipal Money Market Portfolio will determine annually the percentage amounts exempt from New York State and New York City personal income taxes, and the amounts, if any, subject to such taxes. The exclusion or exemption of interest income for federal income tax purposes, or New York State or New York City personal income tax purposes, in most cases does not result in an exemption under the tax laws of any other state or local authority.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE GAMMA CLASSES OF THE MUNICIPAL MONEY MARKET, GOVERNMENT OBLIGATIONS MONEY MARKET AND NEW YORK MUNICIPAL MONEY MARKET
PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE GAMMA CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________ 1998 to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
The Fund will issue share certificates for any of the Gamma Shares only upon the written request of a shareholder sent to PFPC.
OTHER INFORMATION
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
Prospectus
THE DELTA FAMILY
December __, 1998
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 INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
INTRODUCTION...............................................................
FINANCIAL HIGHLIGHTS.......................................................
INVESTMENT OBJECTIVES AND POLICIES......................................... YEAR 2000.................................................................. PURCHASE AND REDEMPTION OF SHARES..........................................
NET ASSET VALUE............................................................
MANAGEMENT................................................................. DISTRIBUTION OF SHARES.....................................................
DIVIDENDS AND DISTRIBUTIONS................................................ TAXES...................................................................... DESCRIPTION OF SHARES...................................................... OTHER INFORMATION..........................................................
Investment Adviser BlackRock Institutional Management Corporation Wilmington, Delaware
Custodian PNC Bank, National Association Philadelphia, Pennsylvania
Administrator and Transfer Agent PFPC Inc. Wilmington, Delaware
Counsel Drinker Biddle & Reath LLP Philadelphia, Pennsylvania
Independent Accountants
THE DELTA FAMILY
of
The RBB Fund, Inc.
The Delta Family consists of four classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares of the classes (collectively, the "Delta Shares" or "Shares") offered by this Prospectus represent interests in a taxable money market portfolio, a municipal money market portfolio, a U.S. Government obligations money market portfolio and a New York municipal money market portfolio (together, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
Municipal Money Market Portfolio--to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Government Obligations Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
New York Municipal Money Market Portfolio--to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is exempt from regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes.
The New York Municipal Money Market Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. An investment in the Portfolios is neither insured nor guaranteed by the U.S. Government or any governmental agency. There can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
An investor may purchase and redeem Shares of any of the Delta classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
BlackRock Institutional Management Corporation ("BIMC") serves as investment adviser for the Portfolios and PNC Bank, National Association ("PNC Bank") serves as custodian for the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
INTRODUCTION
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and is currently operating or proposing to operate seventeen separate investment portfolios. Each of the four classes of the Fund's shares (collectively, the "Delta Classes") offered by this Prospectus represents interests in one of the following investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Money Market, Municipal Money Market and Government Obligations Money Market Portfolios are diversified investment portfolios; the New York Municipal Money Market Portfolio is a non-diversified investment portfolio.
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is Tax-Exempt Interest and is exempt from New York State and New York City personal income taxes and which meet certain ratings criteria and present minimal credit risks.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the Delta Classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the Delta Classes is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Any or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
Estimated Annual Fund Operating Expenses (Delta Classes)
(as a percentage of average daily net assets)
The Fee Table below contains a summary of the annual operating expenses of the Delta Classes based on expenses expected to be incurred for the current fiscal period, as a percentage of average daily net assets. An example based on the summary is also shown.
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
Management Fees (after
waivers)(1)................................. .22% .04% .30% .02%
12b-1 Fees(1) .............................. .53% .56% .56% .52%
Other Expenses.............................. .22% .25% .12% .28%
---- ---- ---- ----
Total Fund Operating
Expenses (after waivers)(1)................. .97% .85% .98% .80%
==== ==== ==== ====
|
(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio, Management Fees would be .37%, .33%, .41% and .35%, respectively, and Total Fund Operating Expenses would be 1.12%, 1.14%, 1.09% and 1.13%, respectively.
Example
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market*........................................ $10 $31 $54 $119
Municipal Money
Market*............................................. $ 9 $27 $47 $105
Government Obligations
Money Market*....................................... $10 $31 $54 $120
New York Municipal
Money Market*....................................... $ 8 $25 $44 $ 99
|
* Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Delta Classes)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Delta Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management--Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on estimated costs and estimated fees expected to be charged to the Delta Classes, taking into account anticipated fee waivers and reimbursements. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Each of the Municipal Money Market Portfolio's and the New York Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate and by increasing the New York Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal, New York State and New York City personal income taxes at stated rates.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of any of the Delta Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in the Delta Classes are not reflected in the total return and yields of the Delta Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Delta Classes may differ from the total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio
depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
FINANCIAL HIGHLIGHTS
No financial data is supplied for the Portfolios because, as of the date of this Prospectus, the Portfolios had no performance history.
INVESTMENT OBJECTIVES AND POLICIES
Money Market Portfolio
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 calendar days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests. There is no assurance that the investment objective of the Money Market Portfolio will be achieved.
Bank Obligations. The Portfolio may purchase obligations of issuers in the banking industry such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
Commercial Paper. The Portfolio may purchase commercial paper rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to be of comparable
quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
Variable Rate Demand Notes. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. Government Obligations. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
Asset-Backed Securities. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the
Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Guaranteed Investment Contracts. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
Municipal Obligations. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Municipal Obligations."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are
recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Eligible Securities. The Portfolio will only purchase "eligible
securities" that present minimal credit risks as determined by the Portfolio's
investment adviser pursuant to guidelines adopted by the Board of Directors.
Eligible securities generally include: (1) U.S. Government securities, (2)
securities that are rated at the time of purchase in the two (2) highest rating
categories by at least two Rating Organizations (e.g., commercial paper rated
"A-1" or "A-2" by Standard & Poor's Rating Services ("S&P")), (3) securities
that are rated at the time of purchase by the only Rating Organization rating
the security in one of its two highest rating categories for such securities,
(4) securities issued by issuers (or, in certain cases guaranteed by persons)
with short-term debt having such ratings, and (5) securities that are not rated
and are issued by an issuer that does not have comparable obligations rated by a
Rating Organization ("Unrated Securities"), provided that such securities are
determined to be of comparable quality to eligible rated securities. For a more
complete description of eligible securities, see "Investment Objectives and
Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
4. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such 5% limitation.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one Rating Organization, are rated (at the time of purchase) by two or more
Rating Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such Rating
Organization in its highest rating category for such securities, (iii) have
no short-term rating and are comparable in priority and security to a class
of short-term obligations of the issuer of such securities that have been
rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities
that are determined to be of comparable quality to such securities.
Purchases of First Tier Securities that come within categories (ii) and
(iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility
being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations whose issuers are in the same state, (ii) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects or are issued by issuers located in the same state, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated.
Tax-Exempt Derivative Securities. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio, as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Eligible Securities. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies--Money Market Portfolio-Eligible Securities."
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio --Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Municipal Money Market Portfolio may not:
1. Purchase the securities of any issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to this 5% limitation.
2. Borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in the obligations at the time of purchase of issuers in the same industry.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy
of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal.
Due to fluctuations in interest rates, the market value of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in
their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values. There is no assurance that the investment objective of the Government Obligations Money Market Portfolio will be achieved.
Repurchase Agreements. The Portfolio may agree to purchase government securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). For a description of repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Repurchase Agreements."
Reverse Repurchase Agreements. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. For a description of reverse repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Reverse Repurchase Agreements."
Mortgage-Related Securities. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself.
The Portfolio may also acquire asset-backed securities as described under "Investment Objectives and Policies -- Money Market Portfolio -- Asset-Backed Securities."
Lending of Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Government Obligations Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The following investment limitations may not be changed, however, without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other
investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of Portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
New York Municipal Money Market Portfolio
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. During periods of normal market conditions, at least 80% of the assets will be invested in Municipal Obligations, the interest on which is Tax-Exempt Interest and which meet certain ratings criteria and present minimal credit risks to the Portfolio. Portfolio obligations held by the New York Municipal Money Market Portfolio will have remaining maturities of 397 days or less ("short-term" obligations). Dividends paid by the Portfolio which are derived from interest attributable to tax-exempt
obligations of the State of New York and its political subdivisions, as well as of certain other governmental issuers such as Puerto Rico ("New York Municipal Obligations"), will be excluded from gross income for federal income tax purposes and exempt from New York State and New York City personal income taxes, but will be subject to corporate franchise taxes. Dividends derived from interest on tax-exempt obligations of other governmental issuers will be excluded from gross income for federal income tax purposes, but will be subject to New York State and New York City personal income taxes. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, at least 65% of the Fund's assets will be invested in New York Municipal Obligations. There is no assurance that the investment objective of the New York Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio -- Municipal Obligations."
Up to 20% of the Portfolio's assets may be invested in Alternative Minimum Tax Securities. Investors should be aware of the possibility of federal, state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (ii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the New York Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated. The Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Tax-Exempt Derivative Securities. The New York Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. For a description of such securities, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Tax-Exempt Derivative Securities."
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Taxable Investments. The Portfolio may for defensive or other purposes invest in certain short-term taxable securities when the Portfolio's investment adviser believes that it would be in the best interests of the Portfolio's investors to do so. Taxable securities in which the Portfolio may invest on a short-term basis are obligations of the U.S. Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by Moody's Investor Service, Inc. ("Moody's") or S&P; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. At no time will more than 20% of the Portfolio's total assets be invested in taxable short-term securities unless the Portfolio's investment adviser has determined to temporarily adopt a defensive investment policy in the face of an anticipated softening in the market for Municipal Obligations in general.
Eligible Securities. The New York Municipal Money Market Portfolio will only purchase "eligible securities." For a more complete description of eligible securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
Special Considerations. As a non-diversified investment company, the Portfolio may invest a greater proportion of its assets in the obligations of a smaller number of issuers relative to a diversified portfolio. As a result, the value of a non-diversified investment portfolio will fluctuate to a greater degree upon changes in the value of each underlying security than a diversified portfolio. In the opinion of the Portfolio's investment adviser, any risk to the Portfolio should be limited by its intention to continue to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended, and by its policies restricting investments to obligations with short-term maturities and obligations which qualify as eligible securities.
The Portfolio's ability to meet its investment objective is dependent upon the ability of issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest on their securities. New York State and New York City face long-term worsening economic problems, which could seriously affect their ability and that of other issuers of New York Municipal Obligations to meet their financial obligations.
Investors should be aware that certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Portfolio) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowing abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and lower market prices for their outstanding debt obligations. Although several different issues of municipal securities of New York State and its agencies and instrumentalities and of New York City have been downgraded by S&P and Moody's in recent years, the most recent actions of S&P and Moody's have been to place the debt obligations of New York State and New York City on CreditWatch with positive implications and to update the debt obligations of New York City, respectively. Strong demand
for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by such issuers could result in defaults or declines in the market values of their existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although no issuers of New York Municipal Obligations were as of the date of this Prospectus in default with respect to the payment of their debt obligations, the occurrence of any such default could adversely affect the market values and marketability of all New York Municipal Obligations and, consequently, the net asset value of the Portfolio's shares. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The New York Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The New York Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The New York Municipal Money Market Portfolio may not:
1. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
2. Purchase any securities which would cause 25% or more of the value of the Portfolio's total assets at the time of purchase to be invested in the securities of issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental
users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
YEAR 2000
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
PURCHASE AND REDEMPTION OF SHARES
Purchase Procedures
General. Delta Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Delta Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Delta Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
Purchases through an Account. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Delta Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Delta Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker.
Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Delta Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares of the Delta Class designated by the investor as the "Primary Delta Class" for his Purchase Program. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker. A participant in a Purchase Program may change the designation of the Primary Delta Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Delta Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made available in Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
Direct Purchases. An investor may also make direct investments at any time in any Delta Class he selects through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment in any of the Delta Classes by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Portfolio in which he wishes to invest, and mailing it, together with a check payable to "The Delta Family" to the Delta Family, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The check must specify the name of the Portfolio for which shares are being purchased. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares in any of the Delta Classes by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 447-1139 (in Delaware call collect (302) 791-1149), and provide your name, address, telephone number, Social Security or Tax Identification Number, the Delta Class selected, the amount being wired, and by which bank or Dealer. PFPC
will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, Pa.
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of the Portfolio) AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Retirement Plans. Delta Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption Procedures
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
Redemption of Shares in an Account. An investor who beneficially owns Delta Shares in an Account may redeem Delta Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares of the Primary Delta Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written request, together with any share certificates issued to the investor, to The Delta Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they
have completed and returned an account application containing the appropriate
telephone election. To add a telephone option to an existing account that
previously did not provide for this option, a Telephone Authorization Form must
be filed with PFPC. This form is available from PFPC. Once this election has
been made, the shareholder may simply contact PFPC by telephone to request the
redemption by calling (888) 261-4073. Neither the Fund, the Distributor, the
Portfolios, the Administrator nor any other Fund agent will be liable for any
loss, liability, cost or expense for following the procedures below or for
following instructions communicated by telephone that they reasonably believe to
be genuine. The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the fund elects to record shareholder
telephone transactions. For accounts held of record by a broker-dealer,
financial institutions, securities dealers, financial planners, trustee,
custodian other than the Distributor or other agent, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by
attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
Additional Redemption Information. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in an Delta Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period
the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
NET ASSET VALUE
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the value of the proportionate interest of each class in the securities, cash, and other assets of the Portfolio, subtracting the accrued and actual liabilities of the class and dividing the result by the number of its shares outstanding of the class. The net asset value per share of each class is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
MANAGEMENT
Board of Directors
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. Each of the Delta Classes represents interests in one of the following such investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreements between BIMC and RBB with respect to the Money Market and Government Obligations Money Market Portfolios provide for BIMC to also assist generally in supervising the operations of each such Portfolio, and to maintain the Portfolios' financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of each of the Money Market and Government Obligations Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the services provided and expenses assumed by it with respect to the Municipal Money Market and New York Municipal Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
PNC Bank was formerly sub-adviser to the Money Market, Municipal Money Market and Government Obligations Portfolios and provided research, credit
analysis and recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
Administrator
PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the administrator for the Municipal Money Market and New York Municipal Money Market Portfolios and generally assists those Portfolios in all aspects of their administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of each of these Portfolios. Pursuant to its advisory agreements with the Fund with respect to the Money Market and Government Obligations Money Market Portfolios, BIMC provides administrative services to such Portfolios pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreements. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market and Government Obligations Money Market Portfolios which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolios to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank serves as the Fund's custodian and PFPC also serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain
shareholder support services to customers of such broker/dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor of the Shares of each of the Delta Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. In addition, distribution expenses, transfer agency expenses, expenses of preparing, printing and distributing prospectuses, statements of additional information, proxy statements and reports to shareholders, and registration fees identified as belonging to a particular class, are allocated to such class.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of decreasing yield to investors.
DISTRIBUTION OF SHARES
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Delta Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Delta Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net assets of the relevant Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Delta Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that
day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Delta Class the fee agreed to under the relevant Distribution Agreement. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Delta Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
TAXES
Distributions from the Money Market Portfolio and the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolios' investments, that a portion of the Portfolios' distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining
federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
Exempt interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income (but not corporate franchise) taxes. The New York Municipal Money Market Portfolio will determine annually the percentage amounts exempt from New York State and New York City personal income taxes, and the amounts, if any, subject to such taxes. The exclusion or exemption of interest income for federal income tax purposes, or New York State or New York City personal income tax purposes, in most cases does not result in an exemption under the tax laws of any other state or local authority.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ______ billion shares are currently classified into ___ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE DELTA CLASSES OF THE MONEY MARKET, MUNICIPAL MONEY MARKET, GOVERNMENT OBLIGATIONS MONEY MARKET AND NEW YORK MUNICIPAL MONEY
MARKET PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE DELTA CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
The Fund will issue share certificates for any of the Delta Shares only upon the written request of a shareholder sent to PFPC.
OTHER INFORMATION
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
Prospectus
THE EPSILON FAMILY
December __, 1998
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 INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
TABLE OF CONTENTS
Page
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INTRODUCTION......................................................................................................
FINANCIAL HIGHLIGHTS..............................................................................................
INVESTMENT OBJECTIVES AND POLICIES................................................................................
YEAR 2000.........................................................................................................
PURCHASE AND REDEMPTION OF SHARES.................................................................................
NET ASSET VALUE...................................................................................................
MANAGEMENT........................................................................................................
DISTRIBUTION OF SHARES............................................................................................
DIVIDENDS AND DISTRIBUTIONS.......................................................................................
TAXES.............................................................................................................
DESCRIPTION OF SHARES.............................................................................................
OTHER INFORMATION.................................................................................................
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Investment Adviser BlackRock Institutional Management Corporation Wilmington, Delaware
Custodian PNC Bank, National Association Philadelphia, Pennsylvania
Administrator and Transfer Agent PFPC Inc. Wilmington, Delaware
Counsel Drinker Biddle & Reath LLP Philadelphia, Pennsylvania
Independent Accountants
THE EPSILON FAMILY
of
The RBB Fund, Inc.
The Epsilon Family consists of four classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares of the classes (collectively, the "Epsilon Shares" or "Shares") offered by this Prospectus represent interests in a taxable money market portfolio, a municipal money market portfolio, a U.S. Government obligations money market portfolio and a New York municipal money market portfolio (together, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
Municipal Money Market Portfolio--to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Government Obligations Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
New York Municipal Money Market Portfolio--to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is exempt from regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes.
The New York Municipal Money Market Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. An investment in the Portfolios is neither insured nor guaranteed by the U.S. Government or any governmental agency. There can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
An investor may purchase and redeem Shares of any of the Epsilon classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
BlackRock Institutional Management Corporation ("BIMC") serves as investment adviser for the Portfolios and PNC Bank, National Association ("PNC Bank") serves as custodian for the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
INTRODUCTION
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and is currently operating or proposing to operate seventeen separate investment portfolios. Each of the four classes of the Fund's shares (collectively, the "Epsilon Classes") offered by this Prospectus represents interests in one of the following investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Money Market, Municipal Money Market and Government Obligations Money Market Portfolios are diversified investment portfolios; the New York Municipal Money Market Portfolio is a non-diversified investment portfolio.
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is Tax-Exempt Interest and is exempt from New York State and New York City personal income taxes and which meet certain ratings criteria and present minimal credit risks.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the Epsilon Classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the Epsilon Classes is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Any or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
Estimated Annual Fund Operating Expenses (Epsilon Classes)
(as a percentage of average daily net assets)
The Fee Table below contains a summary of the annual operating expenses of the Epsilon Classes based on expenses expected to be incurred for the current fiscal period, as a percentage of average daily net assets. An example based on the summary is also shown.
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
Management Fees (after
waivers)(1)................................. .22% .04% .30% .02%
12b-1 Fees(1) .............................. .53% .56% .56% .52%
Other Expenses.............................. .22% .25% .12% .28%
---- ---- ---- ----
Total Fund Operating
Expenses (after waivers)(1)................. .97% .85% .98% .80%
==== ==== ==== ====
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(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio, Management Fees would be .37%, .33%, .41% and .35%, respectively, and Total Fund Operating Expenses would be 1.12%, 1.14%, 1.09% and 1.13%, respectively.
Example
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market*........................................ $10 $31 $54 $119
Municipal Money
Market*............................................. $ 9 $27 $47 $105
Government Obligations
Money Market*....................................... $10 $31 $54 $120
New York Municipal
Money Market*....................................... $ 8 $25 $44 $ 99
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* Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Epsilon Classes)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Epsilon Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management--Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on estimated costs and estimated fees expected to be charged to the Epsilon Classes, taking into account anticipated fee waivers and reimbursements. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Each of the Municipal Money Market Portfolio's and the New York Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate and by increasing the New York Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal, New York State and New York City personal income taxes at stated rates.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of any of the Epsilon Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in the Epsilon Classes are not reflected in the total return and yields of the Epsilon Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Epsilon Classes may differ from the total return and yields on shares of other classes of the Fund that also represent interests in the
same Portfolio depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
FINANCIAL HIGHLIGHTS
No financial data is supplied for the Portfolios because, as of the date of this Prospectus, the Portfolios had no performance history.
INVESTMENT OBJECTIVES AND POLICIES
Money Market Portfolio
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 calendar days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests. There is no assurance that the investment objective of the Money Market Portfolio will be achieved.
Bank Obligations. The Portfolio may purchase obligations of issuers in the banking industry such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
Commercial Paper. The Portfolio may purchase commercial paper rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to
be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
Variable Rate Demand Notes. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. Government Obligations. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
Asset-Backed Securities. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to
have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Guaranteed Investment Contracts. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
Municipal Obligations. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Municipal Obligations."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are
subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two (2) highest rating categories by at least two Rating Organizations (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Rating Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
4. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such 5% limitation.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization, are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities.
Purchases of First Tier Securities that come
within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue
securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations whose issuers are in the same state, (ii) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects or are issued by issuers located in the same state, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated.
Tax-Exempt Derivative Securities. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio, as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Eligible Securities. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies--Money Market Portfolio-Eligible Securities."
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio --Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Municipal Money Market Portfolio may not:
1. Purchase the securities of any issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to this 5% limitation.
2. Borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in the obligations at the time of purchase of issuers in the same industry.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal.
Due to fluctuations in interest rates, the market value of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values. There is no assurance that the investment objective of the Government Obligations Money Market Portfolio will be achieved.
Repurchase Agreements. The Portfolio may agree to purchase government securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). For a description of repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Repurchase Agreements."
Reverse Repurchase Agreements. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. For a description of reverse repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Reverse Repurchase Agreements."
Mortgage-Related Securities. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself.
The Portfolio may also acquire asset-backed securities as described under "Investment Objectives and Policies -- Money Market Portfolio -- Asset-Backed Securities."
Lending of Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Government Obligations Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The following investment limitations may not be changed, however, without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of Portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
New York Municipal Money Market Portfolio
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. During periods of normal market conditions, at least 80% of the assets will be invested
in Municipal Obligations, the interest on which is Tax-Exempt Interest and which meet certain ratings criteria and present minimal credit risks to the Portfolio. Portfolio obligations held by the New York Municipal Money Market Portfolio will have remaining maturities of 397 days or less ("short-term" obligations). Dividends paid by the Portfolio which are derived from interest attributable to tax-exempt obligations of the State of New York and its political subdivisions, as well as of certain other governmental issuers such as Puerto Rico ("New York Municipal Obligations"), will be excluded from gross income for federal income tax purposes and exempt from New York State and New York City personal income taxes, but will be subject to corporate franchise taxes. Dividends derived from interest on tax-exempt obligations of other governmental issuers will be excluded from gross income for federal income tax purposes, but will be subject to New York State and New York City personal income taxes. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, at least 65% of the Fund's assets will be invested in New York Municipal Obligations. There is no assurance that the investment objective of the New York Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio -- Municipal Obligations."
Up to 20% of the Portfolio's assets may be invested in Alternative Minimum Tax Securities. Investors should be aware of the possibility of federal, state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (ii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the New York Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated. The Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Tax-Exempt Derivative Securities. The New York Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. For a description of such securities, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Tax-Exempt Derivative Securities."
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Taxable Investments. The Portfolio may for defensive or other purposes invest in certain short-term taxable securities when the Portfolio's investment adviser believes that it would be in the best interests of the Portfolio's investors to do so. Taxable securities in which the Portfolio may invest on a short-term basis are obligations of the U.S. Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by Moody's Investor Service, Inc. ("Moody's") or S&P; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. At no time will more than 20% of the Portfolio's total assets be invested in taxable short-term securities unless the Portfolio's investment adviser has determined to temporarily adopt a defensive investment policy in the face of an anticipated softening in the market for Municipal Obligations in general.
Eligible Securities. The New York Municipal Money Market Portfolio will only purchase "eligible securities." For a more complete description of eligible securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
Special Considerations. As a non-diversified investment company, the Portfolio may invest a greater proportion of its assets in the obligations of a smaller number of issuers relative to a diversified portfolio. As a result, the value of a non-diversified investment portfolio will fluctuate to a greater degree upon changes in the value of each underlying security than a diversified portfolio. In the opinion of the Portfolio's investment adviser, any risk to the Portfolio should be limited by its intention to continue to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended, and by its policies restricting investments to obligations with short-term maturities and obligations which qualify as eligible securities.
The Portfolio's ability to meet its investment objective is dependent upon the ability of issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest on their securities. New York State and New York City face long-term worsening economic problems, which could seriously affect their ability and that of other issuers of New York Municipal Obligations to meet their financial obligations.
Investors should be aware that certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Portfolio) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowing abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and lower market prices for their outstanding debt obligations. Although several different issues of municipal securities of New York State and its agencies and instrumentalities and of New York
City have been downgraded by S&P and Moody's in recent years, the most recent actions of S&P and Moody's have been to place the debt obligations of New York State and New York City on CreditWatch with positive implications and to update the debt obligations of New York City, respectively. Strong demand for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by such issuers could result in defaults or declines in the market values of their existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although no issuers of New York Municipal Obligations were as of the date of this Prospectus in default with respect to the payment of their debt obligations, the occurrence of any such default could adversely affect the market values and marketability of all New York Municipal Obligations and, consequently, the net asset value of the Portfolio's shares. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The New York Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The New York Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The New York Municipal Money Market Portfolio may not:
1. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
2. Purchase any securities which would cause 25% or more of the value of the Portfolio's total assets at the time of purchase to be invested in the securities
of issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
YEAR 2000
The services provided to the Fund by BIMC and others depend in large
part upon the smooth functioning of their computer systems. Many computer
software systems in use today cannot recognize the year 2000, but revert to 1900
or some other date, due to the manner in which dates were encoded or calculated.
The capability of these systems to recognize the year 2000 could have a negative
impact on BIMC's provision of investment advisory services, including the
handling of securities trades pricing. Both BIMC and PFPC have advised the Fund
that they have been reviewing all of their computer systems, are actively
working on necessary changes to those systems to prepare for the year 2000 and
expect that given the extensive testing which they are undertaking, their
systems will
be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
PURCHASE AND REDEMPTION OF SHARES
Purchase Procedures
General. Epsilon Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Epsilon Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Epsilon Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
Purchases through an Account. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Epsilon Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Epsilon Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information
concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker.
Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Epsilon Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares of the Epsilon Class designated by the investor as the "Primary Epsilon Class" for his Purchase Program. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker. A participant in a Purchase Program may change the designation of the Primary Epsilon Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Epsilon Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made available in Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
Direct Purchases. An investor may also make direct investments at any time in any Epsilon Class he selects through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment in any of the Epsilon Classes by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Portfolio in which he wishes to invest, and mailing it, together with a check payable to "The Epsilon Family" to the Epsilon Family, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The check must specify the name of the Portfolio for which shares are being purchased. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares in any of the Epsilon Classes by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 447-1139 (in Delaware call collect (302) 791-1149), and provide your name, address, telephone number, Social Security or Tax Identification Number, the Epsilon Class selected, the amount being wired, and by which bank or Dealer. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, Pa.
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of the Portfolio) AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Retirement Plans. Epsilon Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption Procedures
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
Redemption of Shares in an Account. An investor who beneficially owns Epsilon Shares in an Account may redeem Epsilon Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the
close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares of the Primary Epsilon Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written request, together with any share certificates issued to the investor, to The Epsilon Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone
if they have completed and returned an account application containing the
appropriate telephone election. To add a telephone option to an existing account
that previously did not provide for this option, a Telephone Authorization Form
must be filed with PFPC. This form is available from PFPC. Once this election
has been made, the shareholder may simply contact PFPC by telephone to request
the redemption by calling (888) 261-4073. Neither the Fund, the Distributor, the
Portfolios, the Administrator nor any other Fund agent will be liable for any
loss, liability, cost or expense for following the procedures below or for
following instructions communicated by telephone that they reasonably believe to
be genuine. The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the fund elects to record shareholder
telephone transactions. For accounts held of record by a broker-dealer,
financial institutions, securities dealers, financial planners, trustee,
custodian other than the Distributor or other agent, additional documentation or
information regarding the scope of a
caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
Additional Redemption Information. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in an Epsilon Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
NET ASSET VALUE
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the value of the proportionate interest of each class in the securities, cash, and other assets of the Portfolio, subtracting the accrued and actual liabilities of the class and dividing the result by the number of its shares outstanding of the class. The net asset value per share of each class is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
MANAGEMENT
Board of Directors
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. Each of the Epsilon Classes represents interests in one of the following such investment portfolios: the Money Market
Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreements between BIMC and RBB with respect to the Money Market and Government Obligations Money Market Portfolios provide for BIMC to also assist generally in supervising the operations of each such Portfolio, and to maintain the Portfolios' financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of each of the Money Market and Government Obligations Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the services provided and expenses assumed by it with respect to the Municipal Money Market and New York Municipal Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
PNC Bank was formerly sub-adviser to the Money Market, Municipal Money Market and Government Obligations Portfolios and provided research, credit analysis and recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
Administrator
PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the administrator for the Municipal Money Market and New York Municipal Money Market Portfolios and generally assists those Portfolios in all aspects of their administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of each of these Portfolios. Pursuant to its advisory agreements with the Fund with respect to the Money Market and Government Obligations Money Market Portfolios, BIMC provides administrative services to such Portfolios pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreements. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market and Government Obligations Money Market Portfolios which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolios to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank serves as the Fund's custodian and PFPC also serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support services to customers of such broker/dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor of the Shares of each of the Epsilon Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. In addition, distribution expenses, transfer agency expenses, expenses of preparing, printing and distributing prospectuses, statements of additional information, proxy statements and reports to shareholders, and registration fees identified as belonging to a particular class, are allocated to such class.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of decreasing yield to investors.
DISTRIBUTION OF SHARES
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Epsilon Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Epsilon Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net assets of the relevant Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Epsilon Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Epsilon Class the fee agreed to under the relevant Distribution Agreement. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Epsilon Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value
made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
TAXES
Distributions from the Money Market Portfolio and the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolios' investments, that a portion of the Portfolios' distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio
are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
Exempt interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income (but not corporate franchise) taxes. The New York Municipal Money Market Portfolio will determine annually the percentage amounts exempt from New York State and New York City personal income taxes, and the amounts, if any, subject to such taxes. The exclusion or exemption of interest income for federal income tax purposes, or New York State or New York City personal
income tax purposes, in most cases does not result in an exemption under the tax laws of any other state or local authority.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ______ billion shares are currently classified into ___ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio to expand its marketing alternatives and to broaden its
range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE EPSILON CLASSES OF THE MONEY MARKET, MUNICIPAL MONEY MARKET, GOVERNMENT OBLIGATIONS MONEY MARKET AND NEW YORK
MUNICIPAL MONEY MARKET PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE EPSILON CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
The Fund will issue share certificates for any of the Epsilon Shares only upon the written request of a shareholder sent to PFPC.
OTHER INFORMATION
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC, the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect (302) 791-1196).
Prospectus
THE ZETA FAMILY
Money Market Portfolio
December __, 1998
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 INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
Investment Adviser BlackRock Institutional Management Corporation Wilmington, Delaware
Custodian PNC Bank, National Association Philadelphia, Pennsylvania
Administrator and Transfer Agent PFPC Inc. Wilmington, Delaware
Counsel Drinker Biddle & Reath LLP Philadelphia, Pennsylvania
Independent Accountants
THE ZETA FAMILY
of
The RBB Fund, Inc.
The Zeta Family consists of four classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares of the classes (collectively, the "Zeta Shares" or "Shares") offered by this Prospectus represent interests in a taxable money market portfolio, a municipal money market portfolio, a U.S. Government obligations money market portfolio and a New York municipal money market portfolio (together, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
Municipal Money Market Portfolio--to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Government Obligations Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
New York Municipal Money Market Portfolio--to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is exempt from regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes.
The New York Municipal Money Market Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. An investment in the Portfolios is neither insured nor guaranteed by the U.S. Government or any governmental agency. There can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
An investor may purchase and redeem Shares of any of the Zeta classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
BlackRock Institutional Management Corporation ("BIMC") serves as investment adviser for the Portfolios and PNC Bank, National Association ("PNC Bank") serves as custodian for the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
INTRODUCTION
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and is currently operating or proposing to operate seventeen separate investment portfolios. Each of the four classes of the Fund's shares (collectively, the "Zeta Classes") offered by this Prospectus represents interests in one of the following investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Money Market, Municipal Money Market and Government Obligations Money Market Portfolios are diversified investment portfolios; the New York Municipal Money Market Portfolio is a non-diversified investment portfolio.
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is Tax-Exempt Interest and is exempt from New York State and New York City personal income taxes and which meet certain ratings criteria and present minimal credit risks.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the Zeta Classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the Zeta Classes is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Any or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
Estimated Annual Fund Operating Expenses (Zeta Classes)
(as a percentage of average daily net assets)
The Fee Table below contains a summary of the annual operating expenses of the Zeta Classes based on expenses expected to be incurred for the current fiscal period, as a percentage of average daily net assets. An example based on the summary is also shown.
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
Management Fees (after
waivers)(1)................................. .22% .04% .30% .02%
12b-1 Fees(1) .............................. .53% .56% .56% .52%
Other Expenses.............................. .22% .25% .12% .28%
---- ---- ---- ----
Total Fund Operating
Expenses (after waivers)(1)................. .97% .85% .98% .80%
==== ==== ==== ====
|
(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio, Management Fees would be .37%, .33%, .41% and .35%, respectively, and Total Fund Operating Expenses would be 1.12%, 1.14%, 1.09% and 1.13%, respectively.
Example
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market*........................................ $10 $31 $54 $119
Municipal Money
Market*............................................. $ 9 $27 $47 $105
Government Obligations
Money Market*....................................... $10 $31 $54 $120
New York Municipal
Money Market*....................................... $ 8 $25 $44 $ 99
|
* Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Zeta Classes)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Zeta Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management--Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on estimated costs and estimated fees expected to be charged to the Zeta Classes, taking into account anticipated fee waivers and reimbursements. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Each of the Municipal Money Market Portfolio's and the New York Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate and by increasing the New York Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal, New York State and New York City personal income taxes at stated rates.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of any of the Zeta Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in the Zeta Classes are not reflected in the total return and yields of the Zeta Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Zeta Classes may differ from the total return and yields on shares of other classes of the Fund that also represent interests in the same
Portfolio depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
FINANCIAL HIGHLIGHTS
No financial data is supplied for the Portfolios because, as of the date of this Prospectus, the Portfolios had no performance history.
INVESTMENT OBJECTIVES AND POLICIES
Money Market Portfolio
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 calendar days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests. There is no assurance that the investment objective of the Money Market Portfolio will be achieved.
Bank Obligations. The Portfolio may purchase obligations of issuers in the banking industry such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
Commercial Paper. The Portfolio may purchase commercial paper rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated commercial paper provided that such paper is determined to
be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
Variable Rate Demand Notes. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. Government Obligations. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
Asset-Backed Securities. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to
have a significant effect on the Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Guaranteed Investment Contracts. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
Municipal Obligations. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Municipal Obligations."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are
subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two (2) highest rating categories by at least two Rating Organizations (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Rating Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make
interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
4. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such 5% limitation.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one Rating Organization, are rated (at the time of purchase) by two or more
Rating Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such Rating
Organization in its highest rating category for such securities, (iii) have
no short-term rating and are comparable in priority and security to a class
of short-term obligations of the issuer of such securities that have been
rated in
accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of
its net assets in (i) Municipal Obligations whose issuers are in the same state,
(ii) Municipal Obligations the interest on which is paid solely from revenues of
similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest,
it does not currently intend to do so on a regular basis. To the extent the
Municipal Money Market Portfolio's assets are concentrated in Municipal
Obligations that are payable from the revenues of similar projects or are issued
by issuers located in the same state, the Portfolio will be subject to the
peculiar risks presented by the laws and economic conditions relating to such
states or projects to a greater extent than it would be if its assets were not
so concentrated.
Tax-Exempt Derivative Securities. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio, as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Eligible Securities. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies--Money Market Portfolio-Eligible Securities."
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio --Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Municipal Money Market Portfolio may not:
1. Purchase the securities of any issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to this 5% limitation.
2. Borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in the obligations at the time of purchase of issuers in the same industry.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal.
Due to fluctuations in interest rates, the market value of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values. There is no assurance that the investment objective of the Government Obligations Money Market Portfolio will be achieved.
Repurchase Agreements. The Portfolio may agree to purchase government securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). For a description of repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Repurchase Agreements."
Reverse Repurchase Agreements. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. For a description of reverse repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Reverse Repurchase Agreements."
Mortgage-Related Securities. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself.
The Portfolio may also acquire asset-backed securities as described under "Investment Objectives and Policies -- Money Market Portfolio -Asset-Backed Securities."
Lending of Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment
Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Government Obligations Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The following investment limitations may not be changed, however, without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of Portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
New York Municipal Money Market Portfolio
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. During periods of normal market conditions, at least 80% of the assets will be invested in Municipal Obligations, the interest on which is Tax-Exempt Interest and which meet certain ratings criteria and present minimal credit risks to the Portfolio. Portfolio obligations held by the New York Municipal Money Market Portfolio will have remaining maturities of 397 days or less ("short-term" obligations). Dividends paid by the Portfolio which are derived from interest attributable to tax-exempt obligations of the State of New York and its political subdivisions, as well as of certain other governmental issuers such as Puerto Rico ("New York Municipal Obligations"), will be excluded from gross income for federal income tax purposes and exempt from New York State and New York City personal income taxes, but will be subject to corporate franchise taxes. Dividends derived from interest on tax-exempt obligations of other governmental issuers will be excluded from gross income for federal income tax purposes, but will be subject to New York State and New York City personal income taxes. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, at least 65% of the Fund's assets will be invested in New York Municipal Obligations. There is no assurance that the investment objective of the New York Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio -- Municipal Obligations."
Up to 20% of the Portfolio's assets may be invested in Alternative Minimum Tax Securities. Investors should be aware of the possibility of federal, state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (ii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the New York Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated. The Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Tax-Exempt Derivative Securities. The New York Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. For a description of such securities, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Tax-Exempt Derivative Securities."
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Taxable Investments. The Portfolio may for defensive or other purposes invest in certain short-term taxable securities when the Portfolio's investment adviser believes that it would be in the best interests of the Portfolio's investors to do so. Taxable securities in which the Portfolio may invest on a short-term basis are obligations of the U.S. Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by Moody's Investor Service, Inc. ("Moody's") or S&P; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. At no time will more than 20% of the Portfolio's total assets be invested in taxable short-term securities unless the Portfolio's investment adviser has determined to temporarily adopt a defensive investment policy in the face of an anticipated softening in the market for Municipal Obligations in general.
Eligible Securities. The New York Municipal Money Market Portfolio will only purchase "eligible securities." For a more complete description of eligible securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
Special Considerations. As a non-diversified investment company, the Portfolio may invest a greater proportion of its assets in the obligations of a smaller number of issuers relative to a diversified portfolio. As a result, the value of a non-diversified investment portfolio will fluctuate to a greater degree upon changes in the value of each underlying security than a diversified portfolio. In the opinion of the Portfolio's investment adviser, any risk to the Portfolio should be limited by its intention to continue to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended, and by its policies restricting investments to obligations with short-term maturities and obligations which qualify as eligible securities.
The Portfolio's ability to meet its investment objective is dependent upon the ability of issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest on their securities. New York State and New York City face long-term worsening economic problems, which could seriously affect their ability and that of other issuers of New York Municipal Obligations to meet their financial obligations.
Investors should be aware that certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Portfolio) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowing abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and lower market prices for their outstanding debt obligations. Although several different issues of municipal securities of New York State and its agencies and instrumentalities and of New York City have been downgraded by S&P and Moody's in recent years, the most recent actions of S&P and Moody's have been to place the debt obligations of New York State and New York City on CreditWatch with positive implications and to update the debt obligations of New York City, respectively. Strong demand for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by such issuers could result in defaults or declines in the market values of their existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although no issuers of New York Municipal Obligations were as of the date of this Prospectus in default with respect to the payment of their debt obligations, the occurrence of any such default could adversely affect the market values and marketability of all New York Municipal Obligations and, consequently, the net asset value of the Portfolio's shares. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The New York Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The New York Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The New York Municipal Money Market Portfolio may not:
1. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the
Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
2. Purchase any securities which would cause 25% or more of the value of the Portfolio's total assets at the time of purchase to be invested in the securities of issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
YEAR 2000
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to
recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
PURCHASE AND REDEMPTION OF SHARES
Purchase Procedures
General. Zeta Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Zeta Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Zeta Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
Purchases through an Account. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Zeta Shares
will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Zeta Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker.
Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Zeta Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares of the Zeta Class designated by the investor as the "Primary Zeta Class" for his Purchase Program. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker. A participant in a Purchase Program may change the designation of the Primary Zeta Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Zeta Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made available in Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
Direct Purchases. An investor may also make direct investments at any time in any Zeta Class he selects through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment in any of the Zeta Classes by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Portfolio in which he wishes to invest, and mailing it, together with a check payable to "The Zeta Family" to the Zeta Family, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The check must specify the name of the Portfolio for which shares are being purchased. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares in any of the Zeta Classes by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The
Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 447-1139 (in Delaware call collect (302) 791-1149), and provide your name, address, telephone number, Social Security or Tax Identification Number, the Zeta Class selected, the amount being wired, and by which bank or Dealer. PFPC will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, Pa.
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of the Portfolio) AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Retirement Plans. Zeta Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption Procedures
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
Redemption of Shares in an Account. An investor who beneficially owns Zeta Shares in an Account may redeem Zeta Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after
12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares of the Primary Zeta Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written request, together with any share certificates issued to the investor, to The Zeta Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have
completed and returned an account application containing the appropriate
telephone election. To add a telephone option to an existing account that
previously did not provide for this option, a Telephone Authorization Form must
be filed with PFPC. This form is available from PFPC. Once this election has
been made, the shareholder may simply contact PFPC by telephone to request the
redemption by calling (888) 261-4073. Neither the Fund, the Distributor, the
Portfolios, the Administrator nor any other Fund agent will be liable for any
loss, liability, cost or expense for following the procedures below or for
following instructions communicated by telephone that they reasonably believe to
be genuine. The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the fund elects to record shareholder telephone transactions. For accounts held of record by a broker-dealer, financial institutions, securities dealers, financial planners, trustee, custodian other than the Distributor or other agent, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
Additional Redemption Information. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to
Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in an Zeta Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
NET ASSET VALUE
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the value of the proportionate interest of each class in the securities, cash, and other assets of the Portfolio, subtracting the accrued and actual liabilities of the class and dividing the result by the number of its shares outstanding of the class. The net asset value per share of each class is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
MANAGEMENT
Board of Directors
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to
operate seventeen separate investment portfolios. Each of the Zeta Classes represents interests in one of the following such investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreements between BIMC and RBB with respect to the Money Market and Government Obligations Money Market Portfolios provide for BIMC to also assist generally in supervising the operations of each such Portfolio, and to maintain the Portfolios' financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of each of the Money Market and Government Obligations Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the services provided and expenses assumed by it with respect to the Municipal Money Market and New York Municipal Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the
Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
PNC Bank was formerly sub-adviser to the Money Market, Municipal Money Market and Government Obligations Portfolios and provided research, credit analysis and recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
Administrator
PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the administrator for the Municipal Money Market and New York Municipal Money Market Portfolios and generally assists those Portfolios in all aspects of their administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of each of these Portfolios. Pursuant to its advisory agreements with the Fund with respect to the Money Market and Government Obligations Money Market Portfolios, BIMC provides administrative services to such Portfolios pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreements. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market and Government Obligations Money Market Portfolios which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolios to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank serves as the Fund's custodian and PFPC also serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support services to customers of such broker/dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor of the Shares of each of the Zeta Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. In addition, distribution expenses, transfer agency expenses, expenses of preparing, printing and distributing prospectuses, statements of additional information, proxy statements and reports to shareholders, and registration fees identified as belonging to a particular class, are allocated to such class.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the
reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of decreasing yield to investors.
DISTRIBUTION OF SHARES
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Zeta Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Zeta Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net assets of the relevant Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Zeta Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Zeta Class the fee agreed to under the relevant Distribution Agreement. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Zeta Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends
are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
TAXES
Distributions from the Money Market Portfolio and the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolios' investments, that a portion of the Portfolios' distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
Exempt interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income (but not corporate franchise) taxes. The New York Municipal Money Market Portfolio will determine annually the percentage amounts exempt from New York State and New York City personal income taxes, and the amounts, if any, subject to such taxes. The exclusion or exemption of interest income for federal income tax purposes, or New York State or New York City personal income tax purposes, in most cases does not result in an exemption under the tax laws of any other state or local authority.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ______ billion shares are currently classified into ___ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio to expand its marketing alternatives and to broaden its
range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE ZETA CLASSES OF THE MONEY MARKET, MUNICIPAL MONEY MARKET, GOVERNMENT OBLIGATIONS MONEY MARKET AND NEW YORK MUNICIPAL MONEY MARKET
PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE ZETA CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
The Fund will issue share certificates for any of the Zeta Shares only upon the written request of a shareholder sent to PFPC.
OTHER INFORMATION
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
Prospectus
THE ETA FAMILY
December __, 1998
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 INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
TABLE OF CONTENTS
Page
INTRODUCTION............................................................... FINANCIAL HIGHLIGHTS....................................................... INVESTMENT OBJECTIVES AND POLICIES......................................... YEAR 2000.................................................................. PURCHASE AND REDEMPTION OF SHARES.......................................... NET ASSET VALUE............................................................ MANAGEMENT................................................................. DISTRIBUTION OF SHARES..................................................... DIVIDENDS AND DISTRIBUTIONS................................................ TAXES...................................................................... DESCRIPTION OF SHARES...................................................... OTHER INFORMATION..........................................................
Investment Adviser BlackRock Institutional Management Corporation Wilmington, Delaware
Custodian PNC Bank, National Association Philadelphia, Pennsylvania
Administrator and Transfer Agent PFPC Inc. Wilmington, Delaware
Counsel Drinker Biddle & Reath LLP Philadelphia, Pennsylvania
Independent Accountants
THE ETA FAMILY
of
The RBB Fund, Inc.
The Eta Family consists of four classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares of the classes (collectively, the "Eta Shares" or "Shares") offered by this Prospectus represent interests in a taxable money market portfolio, a municipal money market portfolio, a U.S. Government obligations money market portfolio and a New York municipal money market portfolio (together, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
Municipal Money Market Portfolio--to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Government Obligations Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
New York Municipal Money Market Portfolio--to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is exempt from regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes.
The New York Municipal Money Market Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. An investment in the Portfolios is neither insured nor guaranteed by the U.S. Government or any governmental agency. There can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
An investor may purchase and redeem Shares of any of the Eta classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
BlackRock Institutional Management Corporation ("BIMC") serves as investment adviser for the Portfolios and PNC Bank, National Association ("PNC Bank") serves as custodian for the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
INTRODUCTION
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and is currently operating or proposing to operate seventeen separate investment portfolios. Each of the four classes of the Fund's shares (collectively, the "Eta Classes") offered by this Prospectus represents interests in one of the following investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Money Market, Municipal Money Market and Government Obligations Money Market Portfolios are diversified investment portfolios; the New York Municipal Money Market Portfolio is a non-diversified investment portfolio.
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is Tax-Exempt Interest and is exempt from New York State and New York City personal income taxes and which meet certain ratings criteria and present minimal credit risks.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the Eta Classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the Eta Classes is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Any or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
Estimated Annual Fund Operating Expenses (Eta Classes)
(as a percentage of average daily net assets)
The Fee Table below contains a summary of the annual operating expenses of the Eta Classes based on expenses expected to be incurred for the current fiscal period, as a percentage of average daily net assets. An example based on the summary is also shown.
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
Management Fees (after
waivers)(1)................................. .22% .04% .30% .02%
12b-1 Fees(1) .............................. .53% .56% .56% .52%
Other Expenses.............................. .22% .25% .12% .28%
---- ---- ---- ----
Total Fund Operating
Expenses (after waivers)(1)................. .97% .85% .98% .80%
==== ==== ==== ====
|
(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio, Management Fees would be .37%, .33%, .41% and .35%, respectively, and Total Fund Operating Expenses would be 1.12%, 1.14%, 1.09% and 1.13%, respectively.
Example
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market*........................................ $10 $31 $54 $119
Municipal Money
Market*............................................. $ 9 $27 $47 $105
Government Obligations
Money Market*....................................... $10 $31 $54 $120
New York Municipal
Money Market*....................................... $ 8 $25 $44 $ 99
|
* Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Eta Classes)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Eta Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management--Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on estimated costs and estimated fees expected to be charged to the Eta Classes, taking into account anticipated fee waivers and reimbursements. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Each of the Municipal Money Market Portfolio's and the New York Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate and by increasing the New York Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal, New York State and New York City personal income taxes at stated rates.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of any of the Eta Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in the Eta Classes are not reflected in the total return and yields of the Eta Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Eta Classes may differ from the total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio
depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
FINANCIAL HIGHLIGHTS
No financial data is supplied for the Portfolios because, as of the date of this Prospectus, the Portfolios had no performance history.
INVESTMENT OBJECTIVES AND POLICIES
Money Market Portfolio
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 calendar days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests. There is no assurance that the investment objective of the Money Market Portfolio will be achieved.
Bank Obligations. The Portfolio may purchase obligations of issuers in the banking industry such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
Commercial Paper. The Portfolio may purchase commercial paper rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated
commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
Variable Rate Demand Notes. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. Government Obligations. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
Asset-Backed Securities. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the
Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Guaranteed Investment Contracts. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
Municipal Obligations. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Municipal Obligations."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are
recorded as an asset at the time the commitment is entered into and are subject to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two (2) highest rating categories by at least two Rating Organizations (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Rating Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
4. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such 5% limitation.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one Rating Organization, are rated (at the time of purchase) by two or more
Rating Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such Rating
Organization in its highest rating category for such securities, (iii) have
no short-term rating and are comparable in priority and security to a class
of short-term obligations of the issuer of such securities that have been
rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities
that are determined to be of comparable quality to such securities.
Purchases of First Tier Securities that come within categories (ii) and
(iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility
being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of
its net assets in (i) Municipal Obligations whose issuers are in the same state,
(ii) Municipal Obligations the interest on which is paid solely from revenues of
similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest,
it does not currently intend to do so on a regular basis. To the extent the
Municipal Money Market Portfolio's assets are concentrated in Municipal
Obligations that are payable from the revenues of similar projects or are issued
by issuers located in the same state, the Portfolio will be subject to the
peculiar risks presented by the laws and economic conditions relating to such
states or projects to a greater extent than it would be if its assets were not
so concentrated.
Tax-Exempt Derivative Securities. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio, as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Eligible Securities. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies--Money Market Portfolio-Eligible Securities."
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio --Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Municipal Money Market Portfolio may not:
1. Purchase the securities of any issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to this 5% limitation.
2. Borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in the obligations at the time of purchase of issuers in the same industry.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of
investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal.
Due to fluctuations in interest rates, the market value of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining
maturities exceeding 397 days if such securities provide for adjustments in their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values. There is no assurance that the investment objective of the Government Obligations Money Market Portfolio will be achieved.
Repurchase Agreements. The Portfolio may agree to purchase government securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). For a description of repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Repurchase Agreements."
Reverse Repurchase Agreements. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. For a description of reverse repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Reverse Repurchase Agreements."
Mortgage-Related Securities. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself.
The Portfolio may also acquire asset-backed securities as described under "Investment Objectives and Policies -- Money Market Portfolio -- Asset-Backed Securities."
Lending of Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Government Obligations Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The following investment limitations may not be changed, however, without such a vote of shareholders. (A more detailed
description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of Portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
New York Municipal Money Market Portfolio
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. During periods of normal market conditions, at least 80% of the assets will be invested in Municipal Obligations, the interest on which is Tax-Exempt Interest and which meet certain ratings criteria and present minimal credit risks to the Portfolio. Portfolio obligations held by the New York Municipal Money Market Portfolio will have remaining maturities of 397 days or less ("short-term" obligations). Dividends paid by the Portfolio which are derived from interest attributable to tax-exempt
obligations of the State of New York and its political subdivisions, as well as of certain other governmental issuers such as Puerto Rico ("New York Municipal Obligations"), will be excluded from gross income for federal income tax purposes and exempt from New York State and New York City personal income taxes, but will be subject to corporate franchise taxes. Dividends derived from interest on tax-exempt obligations of other governmental issuers will be excluded from gross income for federal income tax purposes, but will be subject to New York State and New York City personal income taxes. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, at least 65% of the Fund's assets will be invested in New York Municipal Obligations. There is no assurance that the investment objective of the New York Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio -- Municipal Obligations."
Up to 20% of the Portfolio's assets may be invested in Alternative Minimum Tax Securities. Investors should be aware of the possibility of federal, state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (ii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the New York Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated. The Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Tax-Exempt Derivative Securities. The New York Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. For a description of such securities, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Tax-Exempt Derivative Securities."
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Taxable Investments. The Portfolio may for defensive or other purposes invest in certain short-term taxable securities when the Portfolio's investment adviser believes that it would be in the best interests of the Portfolio's investors to do so. Taxable securities in which the Portfolio may invest on a short-term basis are obligations of the U.S. Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by Moody's Investor Service, Inc. ("Moody's") or S&P; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. At no time will more than 20% of the Portfolio's total assets be invested in taxable short-term securities unless the Portfolio's investment adviser has determined to temporarily adopt a defensive investment policy in the face of an anticipated softening in the market for Municipal Obligations in general.
Eligible Securities. The New York Municipal Money Market Portfolio will only purchase "eligible securities." For a more complete description of eligible securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
Special Considerations. As a non-diversified investment company, the Portfolio may invest a greater proportion of its assets in the obligations of a smaller number of issuers relative to a diversified portfolio. As a result, the value of a non-diversified investment portfolio will fluctuate to a greater degree upon changes in the value of each underlying security than a diversified portfolio. In the opinion of the Portfolio's investment adviser, any risk to the Portfolio should be limited by its intention to continue to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended, and by its policies restricting investments to obligations with short-term maturities and obligations which qualify as eligible securities.
The Portfolio's ability to meet its investment objective is dependent upon the ability of issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest on their securities. New York State and New York City face long-term worsening economic problems, which could seriously affect their ability and that of other issuers of New York Municipal Obligations to meet their financial obligations.
Investors should be aware that certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Portfolio) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowing abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and lower market prices for their outstanding debt obligations. Although several different issues of municipal securities of New York State and its agencies and instrumentalities and of New York City have been downgraded by S&P and Moody's in recent years, the most
recent actions of S&P and Moody's have been to place the debt obligations of New York State and New York City on CreditWatch with positive implications and to update the debt obligations of New York City, respectively. Strong demand for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by such issuers could result in defaults or declines in the market values of their existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although no issuers of New York Municipal Obligations were as of the date of this Prospectus in default with respect to the payment of their debt obligations, the occurrence of any such default could adversely affect the market values and marketability of all New York Municipal Obligations and, consequently, the net asset value of the Portfolio's shares. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The New York Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The New York Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The New York Municipal Money Market Portfolio may not:
1. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
2. Purchase any securities which would cause 25% or more of the value of the Portfolio's total assets at the time of purchase to be invested in the securities of issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental
users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
YEAR 2000
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
PURCHASE AND REDEMPTION OF SHARES
Purchase Procedures
General. Eta Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Eta Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Eta Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
Purchases through an Account. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Eta Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Eta Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker.
Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Eta Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares of the Eta Class designated by the investor as the "Primary Eta Class" for his Purchase Program. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker. A participant in a Purchase Program may change the designation of the Primary Eta Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Eta Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made available in Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
Direct Purchases. An investor may also make direct investments at any time in any Eta Class he selects through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment in any of the Eta Classes by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Portfolio in which he wishes to invest, and mailing it, together with a check payable to "The Eta Family" to the Eta Family, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The check must specify the name of the Portfolio for which shares are being purchased. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares in any of the Eta Classes by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 447-1139 (in Delaware call collect (302) 791-1149), and provide your name, address, telephone number, Social Security or Tax Identification Number, the Eta Class selected, the amount being wired, and by which bank or Dealer. PFPC
will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, Pa.
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of the Portfolio) AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Retirement Plans. Eta Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption Procedures
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
Redemption of Shares in an Account. An investor who beneficially owns Eta Shares in an Account may redeem Eta Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares of the Primary Eta Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written request, together with any share certificates issued to the investor, to The Eta Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have
completed and returned an account application containing the appropriate
telephone election. To add a telephone option to an existing account that
previously did not provide for this option, a Telephone Authorization Form must
be filed with PFPC. This form is available from PFPC. Once this election has
been made, the shareholder may simply contact PFPC by telephone to request the
redemption by calling (888) 261-4073. Neither the Fund, the Distributor, the
Portfolios, the Administrator nor any other Fund agent will be liable for any
loss, liability, cost or expense for following the procedures below or for
following instructions communicated by telephone that they reasonably believe to
be genuine. The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the fund elects to record shareholder
telephone transactions. For accounts held of record by a broker-dealer,
financial institutions, securities dealers, financial planners, trustee,
custodian other than the Distributor or other agent, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by
attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
Additional Redemption Information. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in an Eta Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period
the amount invested in such account is not increased to at least $500. Payment for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
NET ASSET VALUE
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the value of the proportionate interest of each class in the securities, cash, and other assets of the Portfolio, subtracting the accrued and actual liabilities of the class and dividing the result by the number of its shares outstanding of the class. The net asset value per share of each class is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
MANAGEMENT
Board of Directors
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. Each of the Eta Classes represents interests in one of the following such investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreements between BIMC and RBB with respect to the Money Market and Government Obligations Money Market Portfolios provide for BIMC to also assist generally in supervising the operations of each such Portfolio, and to maintain the Portfolios' financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of each of the Money Market and Government Obligations Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the services provided and expenses assumed by it with respect to the Municipal Money Market and New York Municipal Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
PNC Bank was formerly sub-adviser to the Money Market, Municipal Money Market and Government Obligations Portfolios and provided research, credit
analysis and recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
Administrator
PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the administrator for the Municipal Money Market and New York Municipal Money Market Portfolios and generally assists those Portfolios in all aspects of their administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of each of these Portfolios. Pursuant to its advisory agreements with the Fund with respect to the Money Market and Government Obligations Money Market Portfolios, BIMC provides administrative services to such Portfolios pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreements. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market and Government Obligations Money Market Portfolios which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolios to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank serves as the Fund's custodian and PFPC also serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support
services to customers of such broker/dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor of the Shares of each of the Eta Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. In addition, distribution expenses, transfer agency expenses, expenses of preparing, printing and distributing prospectuses, statements of additional information, proxy statements and reports to shareholders, and registration fees identified as belonging to a particular class, are allocated to such class.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of decreasing yield to investors.
DISTRIBUTION OF SHARES
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Eta Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Eta Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net assets of the relevant Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Eta Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Eta Class the fee agreed to under the relevant Distribution Agreement. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Eta Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
TAXES
Distributions from the Money Market Portfolio and the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolios' investments, that a portion of the Portfolios' distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio are exempt for federal income tax
purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
Exempt interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income (but not corporate franchise) taxes. The New York Municipal Money Market Portfolio will determine annually the percentage amounts exempt from New York State and New York City personal income taxes, and the amounts, if any, subject to such taxes. The exclusion or exemption of interest income for federal income tax purposes, or New York State or New York City personal income tax purposes, in most cases does not result in an exemption under the tax laws of any other state or local authority.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ______ billion shares are currently classified into ___ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution
Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE ETA CLASSES OF THE MONEY MARKET, MUNICIPAL MONEY MARKET, GOVERNMENT OBLIGATIONS MONEY MARKET AND NEW YORK MUNICIPAL MONEY MARKET
PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE ETA CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
The Fund will issue share certificates for any of the Eta Shares only upon the written request of a shareholder sent to PFPC.
OTHER INFORMATION
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
Prospectus
THE THETA FAMILY
December __, 1998
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 INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
INTRODUCTION...............................................................
FINANCIAL HIGHLIGHTS.......................................................
INVESTMENT OBJECTIVES AND POLICIES......................................... YEAR 2000.................................................................. PURCHASE AND REDEMPTION OF SHARES..........................................
NET ASSET VALUE............................................................
MANAGEMENT................................................................. DISTRIBUTION OF SHARES.....................................................
DIVIDENDS AND DISTRIBUTIONS................................................ TAXES...................................................................... DESCRIPTION OF SHARES...................................................... OTHER INFORMATION..........................................................
Investment Adviser BlackRock Institutional Management Corporation Wilmington, Delaware
Custodian PNC Bank, National Association Philadelphia, Pennsylvania
Administrator and Transfer Agent PFPC Inc. Wilmington, Delaware
Counsel Drinker Biddle & Reath LLP Philadelphia, Pennsylvania
Independent Accountants
THE THETA FAMILY
of
The RBB Fund, Inc.
The Theta Family consists of four classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988. The Fund is currently operating or proposing to operate seventeen separate investment portfolios. The shares of the classes (collectively, the "Theta Shares" or "Shares") offered by this Prospectus represent interests in a taxable money market portfolio, a municipal money market portfolio, a U.S. Government obligations money market portfolio and a New York municipal money market portfolio (together, the "Portfolios"). The investment objectives of each investment portfolio described in this Prospectus are as follows:
Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments.
Municipal Money Market Portfolio--to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of short-term Municipal Obligations. "Municipal Obligations" are obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
Government Obligations Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and repurchase agreements relating to such obligations.
New York Municipal Money Market Portfolio--to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is exempt from regular federal income tax and is not an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest") and is exempt from New York State and New York City personal income taxes.
The New York Municipal Money Market Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed by PNC Bank, National Association or any other bank and Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other agency. Investments in Shares of the Fund involve investment risks, including the possible loss of principal. An investment in the Portfolios is neither insured nor guaranteed by the U.S. Government or any governmental agency. There can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
An investor may purchase and redeem Shares of any of the Theta classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
BlackRock Institutional Management Corporation ("BIMC") serves as investment adviser for the Portfolios and PNC Bank, National Association ("PNC Bank") serves as custodian for the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent for the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor for the Fund.
This Prospectus contains concise information that a prospective investor needs to know before investing. Please keep it for future reference. A Statement of Additional Information, dated December __, 1998, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained upon request free of charge from the Fund by calling (800) 430-9618. The Prospectus and Statement of Additional Information are also available for reference, along with other related materials, on the Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS December __, 1998
INTRODUCTION
The RBB Fund, Inc. is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and is currently operating or proposing to operate seventeen separate investment portfolios. Each of the four classes of the Fund's shares (collectively, the "Theta Classes") offered by this Prospectus represents interests in one of the following investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Money Market, Municipal Money Market and Government Obligations Money Market Portfolios are diversified investment portfolios; the New York Municipal Money Market Portfolio is a non-diversified investment portfolio.
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in a diversified portfolio of U.S. dollar-denominated money market instruments which meet certain ratings criteria and present minimal credit risks. In pursuing its investment objective, the Money Market Portfolio invests in a broad range of government, bank and commercial obligations that may be available in the money markets.
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. To achieve this objective, the Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations which meet certain ratings criteria and present minimal credit risks. During periods of normal market conditions, at least 80% of the net assets of the Portfolio will be invested in Municipal Obligations, the interest on which is exempt from the regular federal income tax but which may constitute an item of tax preference for purposes of the federal alternative minimum tax.
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. To achieve its objective, the Portfolio invests exclusively in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and enters into repurchase agreements relating to such obligations.
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. It seeks to achieve its objective by investing primarily in Municipal Obligations, the interest on which is Tax-Exempt Interest and is exempt from New York State and New York City personal income taxes and which meet certain ratings criteria and present minimal credit risks.
Each of the Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Portfolios will be able to maintain a stable net asset value of $1.00 per share.
The Portfolios' investment adviser is BlackRock Institutional Management Corporation ("BIMC"). PNC Bank, National Association ("PNC Bank") serves as custodian to the Fund. PFPC Inc. ("PFPC") serves as the administrator and transfer and dividend disbursing agent to the Fund. Provident Distributors, Inc. (the "Distributor") acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the Theta Classes through his broker or by direct purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the Theta Classes is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." Any or all of the Portfolios, to the extent set forth under "Investment Objectives and Policies," may engage in the following investment practices: the use of repurchase agreements and reverse repurchase agreements, the purchase of mortgage-related securities, the purchase of securities on a "when-issued" or "forward commitment" basis, the purchase of stand-by commitments and the lending of securities. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies."
FEE TABLE
Estimated Annual Fund Operating Expenses (Theta Classes)
(as a percentage of average daily net assets)
The Fee Table below contains a summary of the annual operating expenses of the Theta Classes based on expenses expected to be incurred for the current fiscal period, as a percentage of average daily net assets. An example based on the summary is also shown.
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
Management Fees (after
waivers)(1)................................. .22% .04% .30% .02%
12b-1 Fees(1) .............................. .53% .56% .56% .52%
Other Expenses.............................. .22% .25% .12% .28%
---- ---- ---- ----
Total Fund Operating
Expenses (after waivers)(1)................. .97% .85% .98% .80%
==== ==== ==== ====
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(1) Management Fees and 12b-1 Fees are based on average daily net assets and are calculated daily and paid monthly. Before waivers for the Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio, Management Fees would be .37%, .33%, .41% and .35%, respectively, and Total Fund Operating Expenses would be 1.12%, 1.14%, 1.09% and 1.13%, respectively.
Example
An investor would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market*........................................ $10 $31 $54 $119
Municipal Money
Market*............................................. $ 9 $27 $47 $105
Government Obligations
Money Market*....................................... $10 $31 $54 $120
New York Municipal
Money Market*....................................... $ 8 $25 $44 $ 99
|
* Other classes of these Portfolios are sold with different fees and expenses.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (Theta Classes)" 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. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Theta Classes of the Fund will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see "Management--Investment Adviser" and "Distribution of Shares" below.) Expense figures are based on estimated costs and estimated fees expected to be charged to the Theta Classes, taking into account anticipated fee waivers and reimbursements. The Fee Table reflects a voluntary waiver of Management Fees for each Portfolio. However, there can be no assurance that any future waivers of Management Fees will not vary from the figures reflected in the Fee Table. To the extent that any service providers assume additional expenses of the Portfolios, such assumption will have the effect of lowering a Portfolio's overall expense ratio and increasing its yield to investors.
From time to time a Portfolio advertises its "total return", "yield" and "effective yield." Total return and yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Each of the Municipal Money Market Portfolio's and the New York Municipal Money Market Portfolio's "tax-equivalent yield" may also be quoted from time to time, which shows the level of taxable yield needed to produce an after-tax equivalent to such Portfolio's tax-free yield. This is done by increasing the Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal income tax at a stated tax rate and by increasing the New York Municipal Money Market Portfolio's yield (calculated as above) by the amount necessary to reflect the payment of federal, New York State and New York City personal income taxes at stated rates.
The total return and yield of any investment is generally a function of portfolio quality and maturity, type of investment and operating expenses. The total return and yield on Shares of any of the Theta Classes will fluctuate and is not necessarily representative of future results. Any fees charged by broker/dealers directly to their customers in connection with investments in the Theta Classes are not reflected in the total return and yields of the Theta Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The total return and yield on Shares of the Theta Classes may differ from the total return and yields on shares of other classes of the Fund that also represent interests in the same Portfolio
depending on the allocation of expenses to each of the classes of that Portfolio. See "Expenses."
FINANCIAL HIGHLIGHTS
No financial data is supplied for the Portfolios because, as of the date of this Prospectus, the Portfolios had no performance history.
INVESTMENT OBJECTIVES AND POLICIES
Money Market Portfolio
The Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 calendar days or less (exclusive of securities subject to repurchase agreements). In pursuing its investment objective, the Money Market Portfolio invests in a diversified portfolio of U.S. dollar-denominated instruments, such as government, bank and commercial obligations, that may be available in the money markets ("Money Market Instruments") and that meet certain ratings criteria and present minimal credit risks to the Money Market Portfolio. See "Eligible Securities." The following descriptions illustrate the types of Money Market Instruments in which the Money Market Portfolio invests. There is no assurance that the investment objective of the Money Market Portfolio will be achieved.
Bank Obligations. The Portfolio may purchase obligations of issuers in the banking industry such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Portfolio may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the investment adviser deems the instrument to present minimal credit risks. Such investments may nevertheless entail risks in addition to those of domestic issuers, including higher transaction costs, less complete financial information, less stringent regulatory requirements and less market liquidity. The Portfolio may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
Commercial Paper. The Portfolio may purchase commercial paper rated (at the time of purchase) in the two highest rating categories of at least two nationally recognized statistical rating organizations ("Rating Organization") or, by the only Rating Organization providing a rating; or (ii) issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings. These rating categories are described in the Appendix to the Statement of Additional Information. The Portfolio may also purchase unrated
commercial paper provided that such paper is determined to be of comparable quality by the Portfolio's investment adviser in accordance with guidelines approved by the Fund's Board of Directors.
Commercial paper purchased by the Portfolio may include instruments issued by foreign issuers, such as Canadian Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer, subject to the criteria stated above for other commercial paper issuers.
Variable Rate Demand Notes. The Portfolio may purchase variable rate demand notes, which are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustment in the interest rate. Although the notes are not normally traded and there may be no active secondary market in the notes, the Portfolio will be able (at any time or during the specified periods not exceeding 13 months, depending upon the note involved) to demand payment of the principal of a note. The notes are not typically rated by credit rating agencies, but issuers of variable rate demand notes must satisfy the same criteria as set forth above for issuers of commercial paper. If an issuer of a variable rate demand note defaulted on its payment obligation, the Portfolio might be unable to dispose of the note because of the absence of an active secondary market. For this or other reasons, the Portfolio might suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
Repurchase Agreements. The Portfolio may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. Default by or bankruptcy of the seller would, however, expose the Portfolio to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
U.S. Government Obligations. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation.
Asset-Backed Securities. The Portfolio may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and, instrumentalities or issued by private companies. Asset-backed securities also include adjustable rate securities. The estimated life of an asset-backed security varies with the prepayment experience with respect to the underlying debt instruments. For this and other reasons, an asset-backed security's stated maturity may be shortened, and the security's total return may be difficult to predict precisely. Such difficulties are not expected, however, to have a significant effect on the
Portfolio since the remaining maturity of any asset-backed security acquired will be 13 months or less. Asset-backed securities are considered an industry for industry concentration purposes. See "Investment Limitations." In periods of falling interest rates, the rate of mortgage prepayments tends to increase. During these periods, the reinvestment of proceeds by a portfolio will generally be at lower rates than the rates on the prepaid obligations.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. A reverse repurchase agreement involves a sale by a portfolio of securities that it holds concurrently with an agreement by the Portfolio to repurchase them at an agreed upon time and price. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the price at which the Portfolio is obligated to repurchase them. Reverse repurchase agreements are considered to be borrowings by the Portfolio under the Investment Company Act of 1940 (the "1940 Act").
Guaranteed Investment Contracts. The Portfolio may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively "GICs"), issued by highly rated U.S. insurance companies. A GIC is a general obligation of the issuing insurance company and not a separate account. The Portfolio's investments in GICs are not expected to exceed 5% of its total assets at the time of purchase absent unusual market conditions. GIC investments are subject to the Fund's policy regarding investment in illiquid securities.
Municipal Obligations. In addition, the Portfolio may, when deemed appropriate by its investment adviser in light of the Portfolio's investment objective, invest without limitation in high quality, short-term Municipal Obligations issued by state and local governmental issuers, the interest on which may be taxable or tax-exempt for federal income tax purposes, provided that such obligations carry yields that are competitive with those of other types of Money Market Instruments of comparable quality. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Municipal Obligations."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option specified Municipal Obligations at a specified price. The acquisition of a stand-by commitment may increase the cost, and thereby reduce the yield, of the Municipal Obligation to which such commitment relates. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. The Portfolio will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued basis are recorded as an asset at the time the commitment is entered into and are subject
to changes in value prior to delivery based upon changes in the general level of interest rates. The Portfolio expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Portfolio does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include: (1) U.S. Government securities, (2) securities that are rated at the time of purchase in the two (2) highest rating categories by at least two Rating Organizations (e.g., commercial paper rated "A-1" or "A-2" by Standard & Poor's Rating Services ("S&P")), (3) securities that are rated at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities, (4) securities issued by issuers (or, in certain cases guaranteed by persons) with short-term debt having such ratings, and (5) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to eligible rated securities. For a more complete description of eligible securities, see "Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits with maturities in excess of seven days, variable rate demand notes with demand periods in excess of seven days unless the Portfolio's investment adviser determines that such notes are readily marketable and could be sold promptly at the prices at which they are valued, GICs, and other securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. See "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits.
2. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry.
4. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of its total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such 5% limitation.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one Rating Organization, are rated (at the time of purchase) by two or more
Rating Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such Rating
Organization in its highest rating category for such securities, (iii) have
no short-term rating and are comparable in priority and security to a class
of short-term obligations of the issuer of such securities that have been
rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities
that are determined to be of comparable quality to such securities.
Purchases of First Tier Securities that come within categories (ii) and
(iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income exempt from federal income taxes as is consistent with maintaining liquidity and stability of principal. The Municipal Money Market Portfolio invests substantially all of its assets in a diversified portfolio of short-term Municipal Obligations, the interest on which, in the opinion of bond counsel or counsel to the issuer, as the case may be, is exempt from the regular federal income tax. During periods of normal market conditions, at least 80% of the net assets of the Municipal Money Market Portfolio will be invested in Municipal Obligations. Municipal Obligations include securities the interest on which is Tax-Exempt Interest, although to the extent the Portfolio invests in certain private activity bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the interest earned by the Portfolio may constitute an item of tax preference for purposes of the federal alternative minimum tax ("AMT Interest"). There is no assurance that the investment objective of the Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations which are determined by the Portfolio's investment adviser to present minimal credit risks and that meet certain ratings criteria pursuant to guidelines established by the Fund's Board of Directors. The Portfolio may also purchase Unrated Securities provided that such securities are determined to be of comparable quality to eligible rated securities. The applicable Municipal Obligations ratings are described in the Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending investment during temporary defensive periods or if, in the opinion of the Portfolio's investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT Interest are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested during temporary defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility
being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Although the Municipal Money Market Portfolio may invest more than 25% of
its net assets in (i) Municipal Obligations whose issuers are in the same state,
(ii) Municipal Obligations the interest on which is paid solely from revenues of
similar projects, and (iii) private activity bonds bearing Tax-Exempt Interest,
it does not currently intend to do so on a regular basis. To the extent the
Municipal Money Market Portfolio's assets are concentrated in Municipal
Obligations that are payable from the revenues of similar projects or are issued
by issuers located in the same state, the Portfolio will be subject to the
peculiar risks presented by the laws and economic conditions relating to such
states or projects to a greater extent than it would be if its assets were not
so concentrated.
Tax-Exempt Derivative Securities. The Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. A typical tax-exempt derivative security involves the purchase of an interest in a pool of Municipal Obligations which interest includes a tender option, demand or other feature, allowing the Portfolio to tender the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to future principal or interest payments, or both, on underlying municipal securities held by a custodian and such receipts include the option to tender the underlying securities to the sponsor (usually a bank, broker-dealer or other financial institution). Although the Internal Revenue Service has not ruled on whether the interest received on derivative securities in the form of participation interests or custodial receipts is Tax-Exempt Interest, opinions relating to the validity of, and the tax-exempt status of payments received by, the Portfolio from such derivative securities are rendered by counsel to the respective sponsors of such derivatives and relied upon by the Portfolio in purchasing such securities. Neither the Portfolio nor its investment adviser will review the proceedings relating to the creation of any tax-exempt derivative securities or the basis for such legal opinions.
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio, as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Eligible Securities. The Municipal Money Market Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to guidelines adopted by the Board of Directors. For a more complete description of eligible securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities."
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio --Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Municipal Money Market Portfolio may not:
1. Purchase the securities of any issuer, other than securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to this 5% limitation.
2. Borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause more than 25% of the value of the total assets of the Portfolio to be invested in the obligations at the time of purchase of issuers in the same industry.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of
investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest or AMT Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio
The Government Obligations Money Market Portfolio's investment objective is to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal. It seeks to achieve such objective by investing in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and entering into repurchase agreements relating to such obligations. The types of U.S. Government obligations in which the Portfolio may invest include a variety of U.S. Treasury obligations, which differ only in their interest rates, maturities, and times of issuance, and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage-related securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so under law. The Portfolio will invest in the obligations of such agencies or instrumentalities only when the investment adviser believes that the credit risk with respect thereto is minimal.
Due to fluctuations in interest rates, the market value of securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities may vary. Certain government securities held by the Portfolio may have remaining maturities exceeding 397 days if such securities provide for adjustments in
their interest rates not less frequently than every 397 days and the adjustments are sufficient to cause the securities to have market values, after adjustment, which approximate their par values. There is no assurance that the investment objective of the Government Obligations Money Market Portfolio will be achieved.
Repurchase Agreements. The Portfolio may agree to purchase government securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). For a description of repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Repurchase Agreements."
Reverse Repurchase Agreements. The Portfolio may borrow funds by entering into reverse repurchase agreements in accordance with the investment restrictions described below. The Portfolio would consider entering into reverse repurchase agreements to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. For a description of reverse repurchase agreements, see "Investment Objectives and Policies--Money Market Portfolio--Reverse Repurchase Agreements."
Mortgage-Related Securities. Mortgage-related securities consist of mortgage loans which are assembled into pools, the interests in which are issued and guaranteed by an agency or instrumentality of the U.S. Government, though not necessarily by the U.S. Government itself.
The Portfolio may also acquire asset-backed securities as described under "Investment Objectives and Policies -- Money Market Portfolio -- Asset-Backed Securities."
Lending of Securities. The Portfolio may also lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Portfolio'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 Portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The Government Obligations Money Market Portfolio's investment objective and policies described above may be changed by the Fund's Board of Directors without shareholder approval. The following investment limitations may not be changed, however, without such a vote of shareholders. (A more detailed
description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of Portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
New York Municipal Money Market Portfolio
The New York Municipal Money Market Portfolio's investment objective is to provide as high a level of current interest income that is exempt from federal, New York State and New York City personal income taxes as is consistent with preservation of capital and liquidity. During periods of normal market conditions, at least 80% of the assets will be invested in Municipal Obligations, the interest on which is Tax-Exempt Interest and which meet certain ratings criteria and present minimal credit risks to the Portfolio. Portfolio obligations held by the New York Municipal Money Market Portfolio will have remaining maturities of 397 days or less ("short-term" obligations). Dividends paid by the Portfolio which are derived from interest attributable to tax-exempt
obligations of the State of New York and its political subdivisions, as well as of certain other governmental issuers such as Puerto Rico ("New York Municipal Obligations"), will be excluded from gross income for federal income tax purposes and exempt from New York State and New York City personal income taxes, but will be subject to corporate franchise taxes. Dividends derived from interest on tax-exempt obligations of other governmental issuers will be excluded from gross income for federal income tax purposes, but will be subject to New York State and New York City personal income taxes. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, at least 65% of the Fund's assets will be invested in New York Municipal Obligations. There is no assurance that the investment objective of the New York Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term Municipal Obligations. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Municipal Money Market Portfolio -- Municipal Obligations."
Up to 20% of the Portfolio's assets may be invested in Alternative Minimum Tax Securities. Investors should be aware of the possibility of federal, state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may invest more than 25% of its net assets in (i) Municipal Obligations the interest on which is paid solely from revenues of similar projects, and (ii) private activity bonds bearing Tax-Exempt Interest, it does not currently intend to do so on a regular basis. To the extent the New York Municipal Money Market Portfolio's assets are concentrated in Municipal Obligations that are payable from the revenues of similar projects, the Portfolio will be subject to the peculiar risks presented by the laws and economic conditions relating to such states or projects to a greater extent than it would be if its assets were not so concentrated. The Portfolio may invest a significant percentage of its assets in a single issuer, and therefore investment in this Portfolio may be riskier than an investment in other types of money market funds.
Tax-Exempt Derivative Securities. The New York Municipal Money Market Portfolio may invest in tax-exempt derivative securities such as tender option bonds, custodial receipts, participations, beneficial interests in trusts and partnership interests. For a description of such securities, see "Investment Objectives and Policies--Municipal Money Market Portfolio--Tax-Exempt Derivative Securities."
When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Money Market Portfolio--When-Issued Securities."
Stand-By Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio such as described under "Investment Objectives and Policies--Money Market Portfolio--Stand-By Commitments."
Taxable Investments. The Portfolio may for defensive or other purposes invest in certain short-term taxable securities when the Portfolio's investment adviser believes that it would be in the best interests of the Portfolio's investors to do so. Taxable securities in which the Portfolio may invest on a short-term basis are obligations of the U.S. Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by Moody's Investor Service, Inc. ("Moody's") or S&P; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. At no time will more than 20% of the Portfolio's total assets be invested in taxable short-term securities unless the Portfolio's investment adviser has determined to temporarily adopt a defensive investment policy in the face of an anticipated softening in the market for Municipal Obligations in general.
Eligible Securities. The New York Municipal Money Market Portfolio will only purchase "eligible securities." For a more complete description of eligible securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities" and "Investment Objectives and Policies" in the Statement of Additional Information.
Special Considerations. As a non-diversified investment company, the Portfolio may invest a greater proportion of its assets in the obligations of a smaller number of issuers relative to a diversified portfolio. As a result, the value of a non-diversified investment portfolio will fluctuate to a greater degree upon changes in the value of each underlying security than a diversified portfolio. In the opinion of the Portfolio's investment adviser, any risk to the Portfolio should be limited by its intention to continue to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended, and by its policies restricting investments to obligations with short-term maturities and obligations which qualify as eligible securities.
The Portfolio's ability to meet its investment objective is dependent upon the ability of issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest on their securities. New York State and New York City face long-term worsening economic problems, which could seriously affect their ability and that of other issuers of New York Municipal Obligations to meet their financial obligations.
Investors should be aware that certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Portfolio) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowing abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and lower market prices for their outstanding debt obligations. Although several different issues of municipal securities of New York State and its agencies and instrumentalities and of New York City have been downgraded by S&P and Moody's in recent years, the most recent actions of S&P and Moody's have been to place the debt obligations of New York State and New York City on CreditWatch with positive implications and to update the debt obligations of New York City, respectively. Strong demand
for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by such issuers could result in defaults or declines in the market values of their existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although no issuers of New York Municipal Obligations were as of the date of this Prospectus in default with respect to the payment of their debt obligations, the occurrence of any such default could adversely affect the market values and marketability of all New York Municipal Obligations and, consequently, the net asset value of the Portfolio's shares. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of its net assets in illiquid securities. For a more complete description of illiquid securities, see "Investment Objectives and Policies -- Money Market Portfolio -- Illiquid Securities" and "Investment Objectives and Policies--Illiquid Securities" in the Statement of Additional Information.
The New York Municipal Money Market Portfolio's investment objective and the policies described above may be changed by the Fund's Board of Directors without shareholder approval. The New York Municipal Money Market Portfolio may not, however, change the following investment limitations without such a vote of shareholders. (A more detailed description of the following investment limitations, together with other investment limitations that cannot be changed without a vote of shareholders, is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The New York Municipal Money Market Portfolio may not:
1. Borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.)
2. Purchase any securities which would cause 25% or more of the value of the Portfolio's total assets at the time of purchase to be invested in the securities of issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental
users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
In addition, without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, the Portfolio may not change its policy of investing during normal market conditions at least 80% of its net assets in obligations the interest on which is Tax-Exempt Interest.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
YEAR 2000
The services provided to the Fund by BIMC and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on BIMC's provision of investment advisory services, including the handling of securities trades pricing. Both BIMC and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that BIMC or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
PURCHASE AND REDEMPTION OF SHARES
Purchase Procedures
General. Theta Shares are sold without a sales load on a continuous basis by the Distributor. The Distributor is located at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428. Investors may purchase Theta Shares through an account maintained by the investor with his brokerage firm (the "Account") and may also purchase Shares directly by mail or wire. The minimum initial investment is $1,000, and the minimum subsequent investment is $100. The Fund in its sole discretion may accept or reject any order for purchases of Theta Shares.
All payments for initial and subsequent investments should be in U.S. dollars. Purchases will be effected at the net asset value next determined after PFPC, the Fund's transfer agent, has received a purchase order in good order and the Fund's custodian has Federal Funds immediately available to it. In those cases where payment is made by check, Federal Funds will generally become available two Business Days after the check is received. A "Business Day" is any day that both the New York Stock Exchange (the "NYSE") and the Federal Reserve Bank of Philadelphia (the "FRB") are open. On any Business Day, orders which are accompanied by Federal Funds and received by PFPC by 12:00 noon Eastern Time, and orders as to which payment has been converted into Federal Funds by 12:00 noon Eastern Time, will be executed as of 12:00 noon that Business Day. Orders which are accompanied by Federal Funds and received by the Fund after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), and orders as to which payment has been converted into Federal Funds after 12:00 noon Eastern Time but prior to the close of regular trading on the NYSE on any Business Day of the Fund, will be executed as of the close of regular trading on the NYSE on that Business Day, but will not be entitled to receive dividends declared on such Business Day. Orders which are accompanied by Federal Funds and received by the Fund as of the close of regular trading on the NYSE or later, and orders as to which payment has been converted to Federal Funds as of the close of regular trading on the NYSE or later on a Business Day will be processed as of 12:00 noon Eastern Time on the following Business Day.
Purchases through an Account. Purchases of Shares may be effected through an investor's Account with his broker through procedures established in connection with the requirements of Accounts at such broker. In such event, beneficial ownership of Theta Shares will be recorded by the broker and will be reflected in the Account statements provided by the broker to such investors. A broker may impose minimum investment Account requirements. Even if a broker does not impose a sales charge for purchases of Theta Shares, depending on the terms of an investor's Account with his broker, the broker may charge an investor's Account fees for automatic investment and other services provided to the Account. Information concerning Account requirements, services and charges should be obtained from an investor's broker, and this Prospectus should be read in conjunction with any information received from a broker.
Shareholders whose shares are held in the street name account of a broker and who desire to transfer such shares to the street name account of another broker should contact their current broker.
A broker may offer investors maintaining Accounts the ability to purchase Theta Shares under an automatic purchase program (a "Purchase Program") established by a participating broker. An investor who participates in a Purchase Program will have his "free-credit" cash balances in his Account automatically invested in Shares of the Theta Class designated by the investor as the "Primary Theta Class" for his Purchase Program. The frequency of investments and the minimum investment requirement will be established by the broker and the Fund. In addition, the broker may require a minimum amount of cash and/or securities to be deposited in an Account for participants in its Purchase Program. The description of the particular broker's Purchase Program should be read for details, and any inquiries concerning an Account under a Purchase Program should be directed to the broker. A participant in a Purchase Program may change the designation of the Primary Theta Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Theta Shares are received by PFPC prior to 12:00 noon Eastern Time, and the broker guarantees that payment for such Shares will be made available in Federal Funds to the Fund's custodian prior to the close of regular trading on the NYSE, on the same day, such purchase orders will be effective and Shares will be purchased at the offering price in effect as of 12:00 noon Eastern Time on the date the purchase order is received by PFPC.
Direct Purchases. An investor may also make direct investments at any time in any Theta Class he selects through any broker that has entered into a dealer agreement with the Distributor (a "Dealer"). An investor may make an initial investment in any of the Theta Classes by mail by fully completing and signing an application obtained from a Dealer (the "Application"), specifying the Portfolio in which he wishes to invest, and mailing it, together with a check payable to "The Theta Family" to the Theta Family, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The check must specify the name of the Portfolio for which shares are being purchased. An Application will be returned to the investor unless it contains the name of the Dealer from whom it was obtained. Subsequent purchases may be made through a Dealer or by forwarding payment to the Fund's transfer agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also purchase Shares in any of the Theta Classes by having his bank or Dealer wire Federal Funds to the Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a charge for this service. The Fund does not currently charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 447-1139 (in Delaware call collect (302) 791-1149), and provide your name, address, telephone number, Social Security or Tax Identification Number, the Theta Class selected, the amount being wired, and by which bank or Dealer. PFPC
will then provide an investor with a Fund account number. (Investors with existing accounts should also notify PFPC prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount, together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, Pa.
ABA-0310-0005-3.
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Portfolio) FOR PURCHASE OF: (name of the Portfolio) AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address shown thereon. PFPC will not process initial purchases until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Retirement Plans. Theta Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Distributor or your broker. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption Procedures
Redemption orders are effected at the net asset value per share next determined after receipt of the order in proper form by the Fund's transfer agent, PFPC. Investors may redeem all or some of their Shares in accordance with one of the procedures described below.
Redemption of Shares in an Account. An investor who beneficially owns Theta Shares in an Account may redeem Theta Shares in his Account in accordance with instructions and limitations pertaining to his Account by contacting his broker. If such notice is received by PFPC by 12:00 noon Eastern Time on any Business Day, the redemption will be effective as of 12:00 noon Eastern Time on that day. Payment of the redemption proceeds will be made after 12:00 noon Eastern Time on the day the redemption is effected, provided that the Fund's custodian is open for business. If the custodian is not open, payment will be made on the next bank business day. If the redemption request is received between 12:00 noon and the close of regular trading on the NYSE on a Business Day, the redemption will be effective as of the close of regular trading on the NYSE on such Business Day and payment will be made on the next bank business day following receipt of the redemption request. If all Shares are redeemed, all accrued but unpaid dividends on those Shares will be paid with the redemption proceeds.
An investor's brokerage firm may also redeem each day a sufficient number of Shares of the Primary Theta Class to cover debit balances created by transactions in the Account or instructions for cash disbursements. Shares will be redeemed on the same day that a transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for participation in an Account or to terminate participation in an Account for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any number of Shares by sending a written request, together with any share certificates issued to the investor, to The Theta Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Redemption requests must be signed by each shareholder in the same manner as the Shares are registered. Redemption requests for joint accounts require the signature of each joint owner. On redemption requests of $5,000 or more, each signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted.
Direct investors may redeem Shares without charge by telephone if they have
completed and returned an account application containing the appropriate
telephone election. To add a telephone option to an existing account that
previously did not provide for this option, a Telephone Authorization Form must
be filed with PFPC. This form is available from PFPC. Once this election has
been made, the shareholder may simply contact PFPC by telephone to request the
redemption by calling (888) 261-4073. Neither the Fund, the Distributor, the
Portfolios, the Administrator nor any other Fund agent will be liable for any
loss, liability, cost or expense for following the procedures below or for
following instructions communicated by telephone that they reasonably believe to
be genuine. The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Portfolio, all of which must match the
Fund's records; (3) requiring the Fund's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the fund elects to record shareholder
telephone transactions. For accounts held of record by a broker-dealer,
financial institutions, securities dealers, financial planners, trustee,
custodian other than the Distributor or other agent, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by
attorney-in-fact under power of attorney.
Proceeds of a telephone redemption request will be mailed by check to an investor's registered address unless he has designated in his Application or Telephone Authorization that such proceeds are to be sent by wire transfer to a specified checking or savings account. If proceeds are to be sent by wire transfer, a telephone redemption request received prior to the close of regular trading on the NYSE will result in redemption proceeds being wired to the investor's bank account on the next bank business day. The minimum redemption for proceeds sent by wire transfer is $2,500. There is no maximum for proceeds sent by wire transfer. The Fund may modify this redemption service at any time or charge a service fee upon prior notice to shareholders, although no fee is currently contemplated.
Redemption by Check. Upon request, the Fund will provide any direct investor and any investor who does not have check writing privileges for his Account with forms of drafts ("checks") payable through PNC Bank. These checks may be made payable to the order of anyone. The minimum amount of a check is $100; however, a broker may establish a higher minimum. An investor wishing to use this check writing redemption procedure should complete specimen signature cards (available from PFPC), and then forward such signature cards to PFPC. PFPC will then arrange for the checks to be honored by PNC Bank. Investors who own Shares through an Account should contact their brokers for signature cards. Investors of joint accounts may elect to have checks honored with a single signature. Check redemptions will be subject to PNC Bank's rules governing checks. An investor will be able to stop payment on a check redemption. The Fund or PNC Bank may terminate this redemption service at any time, and neither shall incur any liability for honoring checks, for effecting redemptions to pay checks, or for returning checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC Bank, as the investor's agent, will cause the Fund to redeem a sufficient number of full and fractional Shares owned by the investor to cover the amount of the check. This procedure enables the investor to continue to receive dividends on those Shares representing the amount being redeemed by check until such time as the check is presented to PNC Bank. Pursuant to rules under the 1940 Act, checks may not be presented for cash payment at the offices of PNC Bank. This limitation does not affect checks used for the payment of bills or cash at other banks.
Additional Redemption Information. The Fund ordinarily will make payment for all Shares redeemed within seven days after receipt by PFPC of a redemption request in proper form. Although the Fund will redeem Shares purchased by check before the check clears, payment of the redemption proceeds may be delayed for a period of up to fifteen days after their purchase, pending a determination that the check has cleared. This procedure does not apply to Shares purchased by wire payment. Investors should consider purchasing Shares using a certified or bank check or money order if they anticipate an immediate need for redemption proceeds.
The Fund imposes no charge when Shares are redeemed. The Fund reserves the right to redeem any account in an Theta Class involuntarily, on thirty days' notice, if such account falls below $500 and during such 30-day notice period the amount invested in such account is not increased to at least $500. Payment
for Shares redeemed may be postponed or the right of redemption suspended as provided by the rules of the Securities and Exchange Commission.
NET ASSET VALUE
The net asset value per share of each class of the Portfolios for the purpose of pricing purchase and redemption orders is determined twice each day, once as of 12:00 noon Eastern Time and once as of the close of regular trading on the NYSE on each weekday with the exception of those holidays on which either the NYSE or the FRB is closed. Currently, the NYSE is closed on weekends and the customary national business holidays of 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. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed as well as Veterans' Day and Columbus Day. The net asset value per share of each class is calculated by adding the value of the proportionate interest of each class in the securities, cash, and other assets of the Portfolio, subtracting the accrued and actual liabilities of the class and dividing the result by the number of its shares outstanding of the class. The net asset value per share of each class is determined independently of any of the Fund's other classes.
The Fund seeks to maintain for each of the Portfolios a net asset value of $1.00 per share for purposes of purchases and redemptions and values its portfolio securities on the basis of the amortized cost method of valuation described in the Statement of Additional Information under the heading "Valuation of Shares." There can be no assurance that net asset value per share will not vary.
With the approval of the Board of Directors, a Portfolio may use a pricing service, bank or broker-dealer experienced in such matters to value the Portfolio's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
MANAGEMENT
Board of Directors
The business and affairs of the Fund and each investment portfolio are managed under the direction of the Fund's Board of Directors. The Fund currently operates or proposes to operate seventeen separate investment portfolios. Each of the Theta Classes represents interests in one of the following such investment portfolios: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio.
Investment Adviser
BIMC, an indirect majority-owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. BIMC has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank and its subsidiaries currently manage over $____ billion of assets, of which approximately $____ billion are mutual funds. PNC Bank, a national bank whose principal business address is 1600 Market Street, Philadelphia, Pennsylvania 19103, is a wholly owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company and a wholly owned subsidiary of PNC Bank Corp., a multi-bank holding company.
As investment adviser to the Portfolios, BIMC manages such Portfolios and is responsible for all purchases and sales of portfolio securities. In entering into Portfolio transactions for a Portfolio with a broker, BIMC may take into account the sale by such broker of shares of the Fund, subject to the requirements of best execution. The agreements between BIMC and RBB with respect to the Money Market and Government Obligations Money Market Portfolios provide for BIMC to also assist generally in supervising the operations of each such Portfolio, and to maintain the Portfolios' financial accounts and records. These administrative responsibilities have been delegated to PFPC, as described below.
For the services provided to and expenses assumed by it for the benefit of each of the Money Market and Government Obligations Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: .45% of the first $250 million; .40% of the next $250 million; and .35% of net assets in excess of $500 million.
For the services provided and expenses assumed by it with respect to the Municipal Money Market and New York Municipal Money Market Portfolios, BIMC is entitled to receive the following fees, computed daily and payable monthly based on the Portfolio's average daily net assets: .35% of the first $250 million; .30% of the next $250 million; and .25% of net assets in excess of $500 million.
PNC Bank was formerly sub-adviser to the Money Market, Municipal Money Market and Government Obligations Portfolios and provided research, credit
analysis and recommendations with respect to each such Portfolio's investments and supplied certain computer facilities, personnel and other services. The facilities, personnel, services and related expenses have been transferred to BIMC and in return, BIMC's obligation to pay a portion of the sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services, PNC Bank was entitled to receive from BIMC an amount equal to 75% of the investment advisory fee paid by each such Portfolio to BIMC (subject to adjustment in certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no effect on the investment advisory fees payable by the Portfolios to BIMC. The services provided by BIMC and the fees payable by the Portfolio for these services are described further in the Statement of Additional Information under "Management of the Company."
BIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio.
Administrator
PFPC, an indirect wholly-owned subsidiary of PNC Bank Corp., serves as the administrator for the Municipal Money Market and New York Municipal Money Market Portfolios and generally assists those Portfolios in all aspects of their administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC is entitled to an administration fee, computed daily and payable monthly at .10% of the average daily net assets of each of these Portfolios. Pursuant to its advisory agreements with the Fund with respect to the Money Market and Government Obligations Money Market Portfolios, BIMC provides administrative services to such Portfolios pursuant to the same terms, but has delegated to PFPC all of its accounting and administrative obligations under such advisory agreements. The Fund has agreed to pay directly to PFPC the fees for accounting and administrative services to the Money Market and Government Obligations Money Market Portfolios which PFPC would have received directly from BIMC. Such arrangement has no effect on the total advisory and administrative fees payable by such Portfolios to BIMC. PFPC's principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank serves as the Fund's custodian and PFPC also serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker/dealers who have entered into dealer agreements with the Distributor for the provision of certain shareholder support
services to customers of such broker/dealers who are shareholders of the Portfolios. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc., with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, acts as distributor of the Shares of each of the Theta Classes of the Fund pursuant to a distribution agreement dated May 29, 1998 (the "Distribution Agreement").
Expenses
The expenses of each Portfolio are deducted from the total income of such Portfolio before dividends are paid. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios. In addition, distribution expenses, transfer agency expenses, expenses of preparing, printing and distributing prospectuses, statements of additional information, proxy statements and reports to shareholders, and registration fees identified as belonging to a particular class, are allocated to such class.
The investment adviser may assume expenses of the Portfolios from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by the Portfolios for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Portfolio's expense ratio and of decreasing yield to investors.
DISTRIBUTION OF SHARES
The Board of Directors of the Fund approved and adopted the Distribution Agreement and separate Plans of Distribution for each of the Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under each of the Plans, the Distributor is entitled to receive from the relevant Theta Class a distribution fee, which is accrued daily and paid monthly, of up to .65% on an annualized basis of the average daily net assets of the relevant Theta Class. The actual amount of such compensation is agreed upon from time to time by the Fund's Board of Directors and the Distributor. Under the Distribution Agreement the Distributor has agreed to accept compensation for its services thereunder and under the Plans in the amount of .60% of the average daily net assets of the relevant Class on an annualized basis in any year. Pursuant to the conditions of an exemptive order granted by the Securities and Exchange Commission, the Distributor has agreed to waive its fee with respect to a Theta Class on any day to the extent necessary to assure that the fee required to be accrued by such Class does not exceed the income of such Class on that day. In addition, the Distributor may, in its discretion, voluntarily waive from time to time all or any portion of its distribution fee.
Under the Distribution Agreement and the relevant Plan, the Distributor may reallocate an amount up to the full fee that it receives to financial institutions, including Dealers, based upon the aggregate investment amounts maintained by and services provided to shareholders of any relevant Class serviced by such financial institutions. The Distributor may also reimburse Dealers for other expenses incurred in the promotion of the sale of Fund shares. The Distributor and/or Dealers pay for the cost of printing (excluding typesetting) and mailing to prospective investors prospectuses and other materials relating to the Fund as well as for related direct mail, advertising and promotional expenses.
Each of the Plans obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of each Theta Class the fee agreed to under the relevant Distribution Agreement. Payments under the Plans are not based on expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of each of the Portfolios to each Portfolio's shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the relevant Theta Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital gains) earned by each Portfolio will be declared as a dividend on a daily basis and paid monthly. Dividends are payable to shareholders of record immediately prior to the determination of net asset value made as of the close of regular trading on the NYSE. Net short-term capital gains, if any, will be distributed at least annually.
TAXES
Distributions from the Money Market Portfolio and the Government Obligations Money Market Portfolio will generally be taxable to shareholders. It is expected that all, or substantially all, of these distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. The one major exception to these tax principles is that distributions on shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Portfolios' investments, that a portion of the Portfolios' distributions could be taxable to shareholders as ordinary income or capital gains, but it is not expected that this will be the case.
Although distributions from the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio are exempt for federal income tax
purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Municipal Money Market Portfolio and the New York Municipal Money Market Portfolio may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes.
Exempt interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income (but not corporate franchise) taxes. The New York Municipal Money Market Portfolio will determine annually the percentage amounts exempt from New York State and New York City personal income taxes, and the amounts, if any, subject to such taxes. The exclusion or exemption of interest income for federal income tax purposes, or New York State or New York City personal income tax purposes, in most cases does not result in an exemption under the tax laws of any other state or local authority.
The foregoing is only a summary of certain tax considerations under the current law, which may be subject to change in the future. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ______ billion shares are currently classified into ___ different classes of Common Stock (see "Description of Shares" in the Statement of Additional Information).
The Fund offers multiple classes of shares in each of its Money Market Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio to expand its marketing alternatives and to broaden its range of services to different investors. The expenses of the various classes within these Portfolios vary based upon the services provided, which may affect performance. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution
Agreement and pursuant to each of the distribution plans, the Distributor is entitled to receive from each class as compensation for distribution services provided to that class a distribution fee based on average daily net assets. A salesperson or any other person entitled to receive compensation for servicing Fund shares may receive different compensation with respect to different classes in a Portfolio of the Fund. An investor may contact the Fund's Distributor by calling 1-800-888-9723 to request more information concerning other classes available.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE THETA CLASSES OF THE MONEY MARKET, MUNICIPAL MONEY MARKET, GOVERNMENT OBLIGATIONS MONEY MARKET AND NEW YORK MUNICIPAL MONEY
MARKET PORTFOLIOS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE THETA CLASSES OF THESE PORTFOLIOS.
Each share that represents an interest in a Portfolio has an equal proportionate interest in the assets belonging to such Portfolio with each other share that represents an interest in such Portfolio, even where a share has a different class designation than another share representing an interest in that Portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund.
The Fund will issue share certificates for any of the Theta Shares only upon the written request of a shareholder sent to PFPC.
OTHER INFORMATION
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 533-7719 (in Delaware call collect
(302) 791-1196).
BOSTON PARTNERS LARGE CAP VALUE FUND
(Institutional Class)
of
The RBB Fund, Inc.
Boston Partners Large Cap Value Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares of the Institutional Class ("Shares") offered by this Prospectus represent interests in the Fund. The Fund is a diversified fund that seeks long-term growth of capital, with current income as a secondary objective, primarily through equity investments, such as common stocks and securities convertible into common stocks. It seeks to achieve its objectives by investing at least 65% of its total assets in a diversified portfolio consisting of equity securities of issuers with a market capitalization of primarily $1 billion or greater and identified by Boston Partners Asset Management, L.P. (the "Adviser") as equity securities that it believes possess value characteristics. The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
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 and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund by calling (800) 311-9783 or 9829. The Prospectus and the Statement of Additional Information are available for reference, along with other related materials, on the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS ____________, 1998
RBB is an open-end management company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interests in the Boston Partners Large Cap Value Fund. RBB was incorporated in Maryland on February 29, 1988.
FEE TABLE
The following table illustrates annual operating expenses incurred by Institutional Shares of the Fund (after fee waivers and expense reimbursements) for the fiscal period ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees (after waivers)*..................................====%
12b-1 Fees........................................................0.00%
====
Other Expenses (after waivers and reimbursements).................====%
Total Fund Operating Expenses (after waivers
and expense reimbursements)*.............................1.00%
====
|
* In the absence of fee waivers and expense reimbursements, Management Fees would be 0.75%; Other Expenses would be _____%; and Total Fund Operating Expenses would be _____%. Management Fees are based on average daily net assets and are calculated daily and paid monthly.
Example
An investor would pay the following expenses on a $1,000 investment in the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each time period-
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
Boston Partners Large Cap Value Fund $ $ $ $
|
The 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 the various costs and expenses, see "Management" and "Distribution of Shares" below.) The Fee Table reflects expense reimbursements and voluntary waivers of Management Fees and Administrative Services Fees for the Fund. However, there can be no assurance that any future expense reimbursements and waivers of Management Fees and Administrative Services Fees will not vary from the figures reflected in the Fee Table.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The "Financial Highlights" presented below set forth certain investment results for shares of the Institutional Class of the Fund for the period January 2, 1997 (date of inception) through August 31, 1997 and for the fiscal year ended August 31, 1998. The financial data included in this table should be read in conjunction with the financial statements and notes thereto and the unqualified report of _________________________, RBB's independent accountant, which are incorporated by reference into the Statement of Additional Information. Further information about the performance of the Institutional Class of the Fund is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on page 1 of the prospectus.
BOSTON PARTNERS LARGE CAP VALUE FUND
(For an Institutional Share outstanding throughout each period)
For the Period
For the Fiscal January 2, 1997*
Year Ended through August 31,
August 31, 1998 1997
--------------- ------------------
Per Share Operating Performance**
Net asset value, beginning of period................................. $ 10.00
-------
Net investment income (1)............................................ 0.05
Net realized and unrealized gain on investments (2).................. 2.41
-------
Net increase in net assets resulting
from operations...................................................... 2.46
-------
Net asset value, end of period....................................... $ 12.46
=======
Total investment return (3).......................................... 24.60%
Ratios/Supplemental Data $24,603
Net assets, end of period (000)......................................
Ratio of expenses to average net
assets***(1)(4).................................................... 1.00%
Ratio of net investment income to
average net assets***(1)........................................... 1.19%
Portfolio turnover rate****.......................................... 67.16%
Average commission rate per share(5)................................. $0.0397
|
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
period, except for dividends and distributions, if any, which are based
on actual shares outstanding on the dates of distributions.
*** Annualized.
**** Not annualized.
(1) Reflects waivers and reimbursements.
(2) The amount shown for a share outstanding throughout the period is not in
accord with the change in the aggregate gains and losses in investments
during the period because of the timing of sales and repurchases of Fund
shares in relation to fluctuating net asset value during the period.
(3) Total return is calculated assuming a purchase of shares on the first day
and a sale of shares on the last day of the period reported and will
include reinvestments of dividends and distributions, if any. Total return
is not annualized.
(4) Until May 29, 1998, the Institutional Class of the Fund paid .03% of its
average daily net assets to the Fund's previous Distributor in 12b-1 fees.
From May 29, 1998 through August 31, 1998, the Institutional Class of the
Fund paid .03% of its average daily net assets to the Administrative
Services Agent pursuant to the Administrative Services Plan for
Institutional shares in lieu of 12b-1 fees. Without the waiver of advisory,
12b-1, administration and transfer agent fees and without the reimbursement
of certain operating expenses, the ratio of expenses to average net assets
annualized for the period ended August 31, 1997 and the year ended August
31, 1998 would have been 2.64% and _____%, respectively, for the
Institutional Class.
(5) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period subject to such
commissions.
The Fund's investment objective is to provide long-term growth of capital with current income as a secondary objective. The Fund seeks to achieve its objective by investing at least 65% of its total assets in a diversified portfolio consisting primarily of equity securities, such as common stocks and securities convertible into common stocks, of issuers with a market capitalization of $1 billion or greater and identified by the Adviser as possessing value characteristics.
The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
The Adviser selects securities for the Fund based on a continuous study of trends in industries and companies, earnings power and growth and other investment criteria. In general, the Fund's investments are broadly diversified over a number of industries and, as a matter of policy, the Fund will not invest 25% or more of its total assets in any one industry.
The Fund may invest up to 20% of its total assets in securities of foreign issuers. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operated in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. 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 assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. See "Investment Objective and Policies--Foreign Securities" in the Statement of Additional Information.
The Fund may invest the remainder of its total assets in equity securities of issuers with lower capitalization; derivative securities; debt securities issued by U.S. banks, corporations and other business organizations that are investment grade securities; and debt securities issued by the U.S. Government or government agencies.
In accordance with the above-mentioned policies, the Fund may also invest in indexed securities, convertible securities, repurchase and reverse repurchase agreements and dollar rolls, financial futures contracts, options on futures contracts and may lend portfolio securities. See "Investment Objective and Policies" in the Statement of Additional Information.
The Fund may invest in registered investment companies and investment funds in foreign countries subject to the provisions of the Investment Company Act of 1940 (the "1940 Act") and as discussed in "Investment Objective and Policies" in
the Statement of Additional Information. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
While the Adviser intends to fully invest the Fund's assets at all times in accordance with the above mentioned policies, the Fund reserves the right to hold up to 100% of its assets, as a temporary defensive measure, in cash and eligible U.S. dollar-denominated money market instruments. The Adviser will determine when market conditions warrant temporary defensive measures.
The Fund's investment objective and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in the Fund.
The Fund may not change the following investment limitations without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objective and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchases more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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.
If a percentage restriction under one of the Fund's investment policies or restrictions or the use of assets is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
As with other mutual funds, there can be no assurance that the Fund will achieve its objective. The net asset value per share of Shares representing interests in the Fund will fluctuate as the values of its portfolio securities change in response to changing conditions in the equity market. An investment in the Fund is not intended to constitute a balanced investment program. Other risk factors are discussed above under "Investment Objective and Policies" and in the Statement of Additional Information under "Investment Objective and Policies."
European Currency Unification. Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Fund may invest and may result in the Fund facing additional risks in pursuing its investment objective. These risks, which include, but are not limited to, uncertainty as to the proper tax treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of the Fund's net asset value per share.
Year 2000. The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on the Adviser's provision of investment advisory services, including the handling of securities trades pricing. Both the Adviser and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that the Adviser or any other service
provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
General. Investment methods described in this Prospectus are among those that the Fund has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
Board of Directors
The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors.
Investment Adviser
Boston Partners Asset Management, L.P., located at 28 State Street, 21st Floor, Boston, Massachusetts 02109, serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other institutional accounts that had aggregate total assets under management as of _______, 1998 in excess of $____ billion. The adviser is organized as a Delaware limited partnership whose sole general partner is Boston Partners, Inc., a Delaware corporation.
Subject to the supervision and direction of RBB's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objective and policies, makes investment decisions for the Fund, places orders to purchase and sell securities, and employs professional portfolio managers and securities analysts who provide research services to the Fund. For its services to the Fund, the Adviser is entitled to receive under the Advisory Agreement a monthly advisory fee computed at an annual rate of 0.75% of the Fund's average daily net assets. The Adviser is currently waiving advisory fees in excess of _____% of the Fund's average daily net assets.
Portfolio Management
The day-to-day portfolio management of the Fund is the responsibility of Mark E. Donovan and Wayne S. Sharp who are senior portfolio managers of the Adviser. Mr. Donovan is Chairperson of the Adviser's Equity Strategy Committee which oversees the investment activities of the Adviser's $___ billion of Large Capitalization Core Value institutional equity assets under management. Prior to joining the Adviser on April 16, 1995, Mr. Donovan was a Senior Vice President and Vice Chairman of The Boston Company Asset Management, Inc.'s Equity Policy Committee. Mr. Donovan is a Chartered Financial Analyst and has over fifteen years of investment experience. Ms. Sharp is Vice Chairperson of the Adviser's Equity Strategy Committee and has over twenty-one years of investment
experience. Prior to joining the Adviser on April 16, 1995, Ms. Sharp was a Senior Vice President and member of the Equity Policy Committee of The Boston Company Asset Management, Inc. Ms. Sharp is also a Chartered Financial Analyst.
Administrator
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. For its services, PFPC is entitled to receive a fee under an administration and accounting services agreement calculated at an annual rate of .125% of the Fund's average daily net assets with a minimum fee of $75,000 payable monthly on a pro rata basis.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank, National Association ("PNC Bank") serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. The principal offices of PFPC, an indirect, wholly-owned subsidiary of PNC Bank, are located at 400 Bellevue Parkway, Wilmington, Delaware 19809.
Administrative Services Agent
Provident Distributors, Inc. ("PDI"), with a principal business address at Four Falls Corporate Center, Conshohocken, Pennsylvania 19428, provides certain administrative services to the Fund's Institutional Shares not otherwise provided by PFPC. PDI furnishes certain internal quasi-legal, executive and administrative services to the Fund, acts as a liaison between the Fund and its various service providers and coordinates and assists in the preparation of reports prepared on behalf of the Fund. For its services, PDI is entitled to a monthly fee calculated at the annual rate of .15% of the respective average daily net assets of the Fund's Institutional Class. PDI is currently waiving fees in excess of .03% of the average daily net assets of the Fund's Institutional Class.
Distributor
PDI acts as distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares.
Expenses
The expenses of the Fund are deducted from its total income before dividends are paid. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios. The Institutional Class of the Fund pays an administrative services fee, 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 Institutional Class or if it receives different services.
The Adviser may assume expenses of the Fund from time to time. To the extent any service providers assume expenses of the Fund, such assumption of expenses will have the effect of lowering the Fund's overall expense ratio and of increasing its yield to investors.
General
Shares representing interests in the Fund are offered continuously for sale by the Distributor and may be purchased without imposition of a sales charge. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application to the Fund's transfer agent, PFPC. Purchases of Shares may be effected by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Boston Partners Large Cap Value Fund," c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. Shareholders may not purchase shares of the Boston Partners Large Cap Value Fund with a check issued by a third party and endorsed over to the Fund. The name of the Fund, Boston Partners Large Cap Value Fund, must also appear on the check or Federal Reserve Draft. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $100,000 and subsequent investments must be at least $5,000. For purposes of meeting the minimum initial purchase, clients which are part of endowments, foundations or other related groups may be aggregated. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange, Inc. (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased is based on the net asset value next computed after a purchase order is received in good order by the Fund or its agents. Orders received by the Fund or its agents prior to the close of the NYSE (generally 4:00 p.m. Eastern Time) are priced at that Business Day's net asset value. Orders received by the Fund or its agents after the close of the NYSE (generally 4:00 p.m. Eastern Time) are priced at the net asset value next determined on the following Business Day. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
Shares may be purchased and subsequent investments may be made by principals and employees of the Adviser, and by their spouses and children, either directly or through their individual retirement accounts, and by any
pension and profit-sharing plan of the Adviser, without being subject to the minimum investment limitations.
An investor may also purchase Shares by having his bank or his broker wire Federal Funds to PFPC. An investor's bank or broker may impose a charge for this service. The Fund does not currently impose a service charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 261-4073, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-1108-2507
FROM: (name of investor)
ACCOUNT NUMBER: (Investor's account number with the Fund)
FOR PURCHASE OF: Boston Partners Large Cap Value Fund
AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process redemptions until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Automatic Investing
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account. Investors desiring to participate in the automatic investing program should call the Fund's transfer agent, PFPC, at (888) 261-4073 to obtain the appropriate forms.
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Boston Partners Large Cap Value Fund, c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. There is no charge for a redemption.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "How to Redeem and Exchange Shares -- Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents of the request and any other necessary documents in proper order. Such payment may be postponed or the right of redemption suspended as permitted by the rules of the SEC. If the Shares to be redeemed have been recently purchased by check, the Fund's transfer agent may delay mailing a redemption check, which may be a period of up to 15 days, pending a determination that the check has cleared. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that a portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
Exchange Privilege
The exchange privilege is available to shareholders residing in any state in which the Shares being acquired may be legally sold. A shareholder may exchange Shares of the Fund for Institutional Shares of any other Boston Partners Fund of RBB, subject to restrictions described under "Exchange Privilege Limitations" below. Such exchange will be effected at the net asset value of the exchanged Fund and the net asset value of the Fund being acquired next determined after receipt of a request for an exchange by the Fund or its agents. An exchange of Shares will be treated as a sale for federal income tax purposes. See "Taxes." A shareholder wishing to make an exchange may do so by sending a written request to PFPC.
If the exchanging shareholder does not currently own Institutional Shares of the Boston Partners Fund into which he would like to exchange, a new account will be established with the same registration, dividend and capital gain options as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted. The exchange privilege may be modified or terminated at any time, or from time to time, by RBB, upon 60 days' written notice to shareholders.
If an exchange is to a new account in the acquired Fund, the dollar value of Shares acquired must equal or exceed that Fund's minimum for a new account; if to an existing account, the dollar value must equal or exceed that Fund's minimum for subsequent investments. If any amount remains in the Fund from which the exchange is being made, such amount must not drop below the minimum account value required by the Fund.
Exchange Privilege Limitations
The Fund's exchange privilege is not intended to afford shareholders a way to speculate on short-term movements in the market. Accordingly, in order to prevent excessive use of the exchange privilege that may potentially disrupt the management of the Fund and increase transactions costs, the Fund has established a policy of limiting excessive exchange activity.
Shareholders are entitled to six (6) exchange redemptions (at least 30 days apart) from the Fund during any twelve-month period. Notwithstanding these limitations, the Fund reserves the right to reject any purchase request (including purchases by exchange) that is deemed to be disruptive to efficient portfolio management.
Telephone Transactions
In order to request an exchange or redemption by telephone, a shareholder must have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account
that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the exchange or redemption by calling (888) 261-4073. Neither RBB, the Fund, the Distributor, the Administrator nor any Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures: (1) requiring the appropriate telephone transaction privilege forms; (2) requiring the caller to provide the names of the account owners, the account social security number and name of the Fund, all of which must match RBB's records; (3) requiring RBB's service representative to complete a telephone transaction form, listing all of the above caller identification information; (4) permitting exchanges only if the two account registrations are identical; (5) requiring that redemption proceeds be sent only by check to the account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (6) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) Business Days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Fund elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than the Distributor), financial institutions, securities dealers, financial planners and other industry professionals, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by an attorney-in-fact under a power of attorney.
The net asset value for each class of a fund is calculated by adding the value of the proportionate interest of the class in a fund's securities, cash and other assets, deducting the actual and accrued liabilities of the class and dividing by the result of outstanding shares of the class. The net asset value of each class is calculated independently of each other class. The net asset values are calculated as of 4:00 p.m. Eastern Time on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of RBB'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.
With the approval of RBB's Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and tractional Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually and pays them in the calendar year in which they are declared, generally in December. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
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 for federal income tax purposes. So long as the Fund qualifies for this tax treatment, it will be relieved of federal income tax on amounts distributed to shareholders. The Fund intends to make sufficient actual or deemed distributions prior to the end of each calendar year to avoid liability for federal income or excise tax.
Fund distributions to shareholders, unless otherwise exempt, will be taxable (except distributions that are treated for federal income tax purposes as a return of capital) regardless of whether the distributions are received in cash or reinvested in additional shares. Distributions out of the "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), if any, of a Fund will be taxed to shareholders as long-term capital gain regardless of the length of time a shareholder has held his Shares. All other taxable distributions are taxed to shareholders as ordinary income.
RBB 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, if such dividends are paid during January of the following year.
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 shares just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received, although the distribution is, in effect, a return of capital.
Shareholders who sell or redeem shares, or exchange shares representing interests in one Fund for shares representing interests in another Fund, will generally recognize capital gain or loss for federal income tax purposes. The gain or loss will be long-term capital gain or loss if the shares have been held for more than twelve months, and short-term otherwise, except that a loss on shares held six months or less will be treated as long-term capital loss to the extent of any capital gains distribution received on the shares.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships are generally subject to different U.S. Federal income tax treatment from that described above. In particular, such shareholders will generally not be subject to U.S. federal income tax on capital gains on or with respect to their shares, and other distributions to them will be subject to 30% withholding tax unless such tax is reduced or eliminated under an applicable tax treaty.
The Fund offers two other classes of shares, Investor Shares, which are offered directly to individual investors, and Advisor Shares, which are offered primarily to investors seeking investment of funds held in an advisory or other similar capacity, pursuant to separate prospectuses. Shares of each class represent equal pro rata interests in the Fund and accrue dividends and calculate net asset value and performance quotations in the same manner. The Fund will quote performance of the Investor Shares and Advisor Shares separately from Institutional Shares. Because of different expenses paid by the Institutional Shares, the total return on such shares can be expected, at any time, to be different than the total return on Investor Shares or Advisor Shares. Information concerning these other classes may be obtained by calling the Fund at (800) 311-9783 or 9829.
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified into ___ different classes of Common Stock. See "Description of Shares" in the Statement of Additional Information."
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO BOSTON PARTNERS LARGE CAP VALUE FUND AND DESCRIBE
ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO BOSTON PARTNERS LARGE CAP VALUE 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, even where a share has a different class designation than another share representing an interest in the Fund. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of Shares of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when RBB's Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ____________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to the Fund's transfer agent, PFPC, at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-tree (888) 261-4073.
Share Certificates
In the interest of economy and convenience, physical certificates representing Shares in the Fund are not normally issued.
Historical Performance Information
For the period from commencement of operations (January 2, 1997) through August 31, 1998, the total return since inception (not annualized) for the Institutional Class of Shares of the Fund was as follows:
Unannualized investment returns for the period ended August 31, 1998
The total return assumes reinvestment of all dividends and capital gains and reflects expense reimbursements and investment advisory fee waivers in effect. Without these expense reimbursements or waivers, the Fund's performance would have been lower. Of course, past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that Shares, when redeemed, may be worth more or less than the original cost. For more information on performance, see "Performance Information" in the Statement of Additional Information.
The table below presents the Composite performance history of certain of the Adviser's managed accounts on an annualized basis for the period ended August 31, 1998. The Composite is comprised of the Adviser's institutional accounts and other privately managed accounts with investment objectives, policies and strategies substantially similar to those of the Fund, although the accounts have longer operating histories than the Fund, which commenced operations on January 2, 1997. The Composite performance information includes the reinvestment of dividends received in the underlying securities and reflects investment advisory fees. The privately managed accounts in the Composite are only available to the Adviser's institutional advisory clients. The past performance of the accounts which comprise the Composite is not indicative of the future performance of the Fund. These accounts have lower investment advisory fees than the Fund, and the Composite performance figures would have been lower if subject to the higher fees and expenses incurred by the Fund. These private accounts are also not subject to the same investment limitations, diversification requirements and other restrictions, which are imposed upon mutual funds under the 1940 Act and the Internal Revenue Code, which, if imposed, may have adversely affected the performance results of the Composite. Listed below the performance history for the Composite is a comparative index comprised of securities similar to those in which accounts contained in the Composite are invested.
Annualized investment returns for the period ended August 31, 1998
Since
One Year Inception*
-------- ----------
Composite Performance.............. ___% ___%
S&P 500 Stock Index................ ___% ___%
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* The Adviser commenced managing these accounts on June 1, 1995.
The S&P 500 Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the NYSE.
Future 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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as Business Week, Fortune, Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
[THIS PAGE INTENTIONALLY LEFT BLANK]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'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 RBB OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
INTRODUCTION.........................................2 FINANCIAL HIGHLIGHTS.................................3 INVESTMENT OBJECTIVES AND POLICIES...................6 INVESTMENT LIMITATIONS...............................7 RISK FACTORS.........................................8 MANAGEMENT...........................................8 ADMINISTRATIVE SERVICES AGENT.......................10 HOW TO PURCHASE SHARES..............................11 HOW TO REDEEM AND EXCHANGE SHARES...................13 NET ASSET VALUE.....................................15 DIVIDENDS AND DISTRIBUTIONS.........................16 TAXES...............................................16 MULTI-CLASS STRUCTURE...............................17 DESCRIPTION OF SHARES...............................17 OTHER INFORMATION...................................18 Investment Adviser Boston Partners Asset Management, L.P. Boston, Massachusetts Custodian PNC Bank, N.A. Philadelphia, Pennsylvania Transfer Agent and Administrator PFPC Inc. Wilmington, Delaware Distributor and Administrative Services Agent Provident Distributors, Inc. Conshohocken, Pennsylvania Counsel Drinker Biddle & Reath LLP Philadelphia, Pennsylvania |
Independent Accountants
PROSPECTUS
____________, 1998
BOSTON PARTNERS
LARGE CAP
VALUE FUND
(Institutional Shares)
bp
Boston Partners Large Cap Value Fund bp
(Institutional Class) BOSTON PARTNERS ASSET MANAGEMENT, L.P.
--------------------------------------
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ACCOUNT APPLICATION
Please Note: Do not use this form to open a retirement plan account. For an IRA application or help with this Application, please call 1-888-261-4073
(Please check the appropriate box(es) below.)
------------------- 1. Account Registration: ------------------- |_| Individual |_| Joint Tenant |_| Other -------------------------------------------------------------------------------- Name SOCIAL SECURITY NUMBER OR TAX ID # OF PRIMARY OWNER -------------------------------------------------------------------------------- NAME OF JOINT OWNER JOINT OWNER SOCIAL SECURITY NUMBER OR TAX ID # |
For joint accounts, the account registrants will be joint tenants with right of survivorship and not tenants in common unless tenants in common or community property registrations are requested.
|_| Uniform Gifts/Transfer to Minor's Act
------------------- CORPORATION, PARTNERSHIP, TRUST OR OTHER ENTITY: ------------------- -------------------------------------------------------------------------------- NAME OF CORPORATION, PARTNERSHIP, OR OTHER NAME(S) OF TRUSTEE(S) -------------------------------------------------------------------------------- TAXPAYER IDENTIFICATION NUMBER -------------------------------------------------------------------------------- STREET OR P.O. BOX AND/OR APARTMENT NUMBER -------------------------------------------------------------------------------- CITY STATE ZIP CODE -------------------------------------------------------------------------------- DAY PHONE NUMBER EVENING PHONE NUMBER Minimum initial investment of $100,000 Amount of investment $____________ |
Make the check payable to Boston Partners Large Cap Value Fund.
Shareholders may not purchase shares of this Fund with a check issued by a third party and endorsed over to the Fund.
Note: Dividends and capital gains may be reinvested or paid by check. If no options are selected below, both dividends and capital gains will be reinvested in additional Fund shares.
Dividends |_| Pay by check |_| Reinvest |_| Capital Gains |_| Pay by check |_| Reinvest |_|
To use this option, you must initial the appropriate line below.
I authorize the Transfer Agent to accept instructions from any persons to redeem or exchange shares in my account(s) by telephone in accordance with the procedures and conditions set forth in the
______________________ __________________________ Redeem shares, and send
individual initial joint initial the proceeds to the
address of record.
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______________________ __________________________ Exchange shares for
individual initial joint initial shares of The Boston
Partners Mid Cap Value
Fund, Bond Fund, Micro
Cap Value Fund, Market
Neutral Fund or
Long-Short Equity Fund.
|
The Account Investment Plan which is available to shareholders of the Fund, makes possible regularly scheduled purchases of Fund shares to allow dollar-cost averaging. The Fund's Transfer Agent can arrange for an amount of money selected by you to be deducted from your checking account and used to purchase shares of the Fund.
Please debit $________ from my checking account (named below) on or about the 20th of the month. Please attach an unsigned, voided check.
|_| Monthly |_| Every Alternate Month |_| Quarterly |_| Other ------------------- BANK OF RECORD: ------------------- -------------------------------------------------------------------------------- BANK NAME STREET ADDRESS OR P.O. BOX -------------------------------------------------------------------------------- CITY STATE ZIP CODE -------------------------------------------------------------------------------- BANK ABA NUMBER BANK ACCOUNT NUMBER |
The undersigned warrants that I (we) have full authority and, if a natural person, I (we) am (are) of legal age to purchase shares pursuant to this Account Application, and I (we) have received a current prospectus for the Fund in which I (we) am (are) investing.
Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is required to have the following certification:
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to), and (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service that I am subject to 31% backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
Note: You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. The Internal Revenue Service does not require your consent to any provision of this document other than the certification required to audit backup withholding.
-------------------------------------------------------------------------------- SIGNATURE OF APPLICANT DATE -------------------------------------------------------------------------------- PRINT NAME TITLE (IF APPLICABLE) -------------------------------------------------------------------------------- SIGNATURE OF JOINT OWNER DATE -------------------------------------------------------------------------------- PRINT NAME TITLE (IF APPLICABLE) |
(If you are signing for a corporation, you must indicate corporate office or title. If you wish additional signatories on the account, please include a corporate resolution. If signing as a fiduciary, you must indicate capacity.)
For information on additional options, such as IRA Applications, rollover requests for qualified retirement plans, or for wire instructions, please call us at 1-888-261-4073.
Mail completed Account Application and check to: The Boston Partners Large Cap Value Fund c/o PFPC Inc. P.O. Box 8852 Wilmington, DE 19899-8852
BOSTON PARTNERS LARGE CAP VALUE FUND
(Investor Class)
of
The RBB Fund, Inc.
Boston Partners Large Cap Value Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares of the Investor Class ("Shares") offered by this Prospectus represent interests in the Fund. The Fund is a diversified fund that seeks long-term growth of capital, with current income as a secondary objective, primarily through equity investments, such as common stocks and securities convertible into common stocks. It seeks to achieve its objectives by investing at least 65% of its total assets in a diversified portfolio consisting of equity securities of issuers with a market capitalization of primarily $1 billion or greater and identified by Boston Partners Asset Management, L.P. (the "Adviser") as equity securities that it believes possess value characteristics. The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
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 and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund by calling (800) 311-9783 or 9829. The Prospectus and the Statement of Additional Information are available for reference, along with other related material, on the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS ____________, 1998
RBB is an open-end management investment company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interests in the Boston Partners Large Cap Value Fund. RBB was incorporated in Maryland on February 29, 1988.
FEE TABLE
The following table illustrates annual operating expenses incurred by Investor Shares of the Fund (after fee waivers and expense reimbursements) for the fiscal period ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees (after waivers)*............................................................____% 12b-1 Fees (after waivers)*.................................................................____% Other Expenses (after waivers and reimbursements)*............................................................................____% Total Fund Operating Expenses (after waivers and expense reimbursements)*.................................................====% |
* In the absence of expense reimbursements and fee waivers, Management Fees would be 0.75%, 12b-1 Fees would be 0.25%, Other Expenses would be ____%, and Total Fund Operating Expenses would be ____%. Management Fees and 12b-1 Fees are each based on average daily net assets and are calculated daily and paid monthly.
Example
An investor would pay the following expenses on a $1,000 investment in the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each time period:
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
Boston Partners Large
Cap Value Fund.............................. $__ $__ $__ $___
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The 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 the various costs and expenses, see "Management" and "Distribution of Shares" below.) The Fee Table reflects expense reimbursements and voluntary waivers of Management Fees and 12b-1 Fees for the Fund. However, the Adviser, the Distributor and the other service
providers are under no obligation with respect to such expense reimbursements and waivers and there can be no assurance that any future expense reimbursements and waivers of Management Fees and 12b-1 Fees will not vary from the figures reflected in the Fee Table.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The "Financial Highlights" presented below set forth certain investment results for shares of the Investor Class of the Fund for the period January 16, 1997 (date of inception) through August 31, 1997 and for the fiscal year ended August 31, 1998. The financial data included in this table should be read in conjunction with the financial statements and notes thereto and the unqualified report of ___________________________, RBB's independent accountant, which are incorporated by reference into the Statement of Additional Information. Further information about the performance of the Investor Class of the Fund is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on page 1 of the prospectus.
BOSTON PARTNERS LARGE CAP VALUE FUND
(For an Investor Share outstanding throughout each period)
For the For the Period
Fiscal Year January 16, 1997*
Ended through
August 31, 1998 August 31, 1997
--------------- ---------------
Per Share Operating Performance**
Net asset value, beginning of period........................ $10.20
------
Net investment income(1).................................... 0.02
Net realized and unrealized gain on investments(2).......... 2.23
------
Net increase in net assets resulting from operations........ 2.25
------
Net asset value, end of period.............................. $12.45
======
Total investment return(3).................................. 22.06%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)................... $683
Ratio of expenses to average net assets***(1)(4)............ 1.11%
Ratio of net investment income to average net assets***(1).. .91%
Portfolio turnover rate****................................. 67.16%
Average commission rate per share(5)........................ $0.0397
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The Fund's investment objective is to provide long-term growth of capital with current income as a secondary objective. The Fund seeks to achieve its objective by investing at least 65% of its total assets in a diversified portfolio consisting primarily of equity securities, such as common stocks and securities convertible into common stocks, of issuers with a market capitalization of $1 billion or greater and identified by the Adviser as possessing value characteristics.
The Adviser examines various factors in determining the value characteristics of such issuers, including but not limited to price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
The Adviser selects securities for the Fund based on a continuous study of trends in industries and companies, earnings power and growth and other investment criteria. In general, the Fund's investments are broadly diversified over a number of industries and, as a matter of policy, the Fund will not invest 25% or more of its total assets in any one industry.
The Fund may invest up to 20% of its total assets in securities of foreign issuers. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operating in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. 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 assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. See "Investment Objective and Policies--Foreign Securities" in the Statement of Additional Information.
The Fund may invest the remainder of its total assets in equity securities of issuers with lower capitalizations; derivative securities; debt securities issued by U.S. banks, corporations and other business organizations that are investment grade securities; and debt securities issued by the U.S. Government or government agencies.
In accordance with the above-mentioned policies, the Fund may also invest in indexed securities, convertible securities, repurchase agreements, reverse repurchase agreements, dollar rolls, financial futures contracts, options on futures contracts and may lend portfolio securities. See "Investment Objective and Policies" in the Statement of Additional Information.
The Fund may invest in registered investment companies and investment funds in foreign countries subject to the provisions of the Investment Company Act of 1940, as amended (the "1940 Act") and as discussed in "Investment Objective and Policies" in the Statement of
Additional Information. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
While the Adviser intends to fully invest the Fund's assets at all times in accordance with the above-mentioned policies, the Fund reserves the right to hold up to 100% of its assets, as a temporary defensive measure, in cash and eligible U.S. dollar-denominated money market instruments. The Adviser will determine when market conditions warrant temporary defensive measures.
The Fund's investment objective and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in the Fund.
The Fund may not change the following investment limitations without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objective and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchases, more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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.
If a percentage restriction under one of the Fund's investment policies or restrictions or the use of assets is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
As with other mutual funds, there can be no assurance that the Fund will achieve its objective. The net asset value per share of Shares representing interests in the Fund will fluctuate as the values of its portfolio securities change in response to changing conditions in the equity market. An investment in the Fund is not intended to constitute a balanced investment program. Other risk factors are discussed above under "Investment Objective and Policies" and in the Statement of Additional Information under "Investment Objective and Polices."
European Currency Unification
Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Fund may invest and may result in the Fund facing additional risks in pursuing its investment objective. These risks, which include, but are not limited to, uncertainty as to the proper tax treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of the Fund's net asset value per share.
Year 2000
The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on the Adviser's provision of investment advisory services, including the handling of securities trades pricing. Both the Adviser and PFPC have advised RBB that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems
will be year 2000 compliant before such date. There can, however, be no assurance that the Adviser or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
General
Investment methods described in this Prospectus are among those which the Fund has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
Board of Directors
The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors.
Investment Adviser
Boston Partners Asset Management, L.P. located at 28 State Street, 21st Floor, Boston, Massachusetts 02109 serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other institutional accounts that had aggregate total assets under management as of _________, 1998, in excess of $____ billion. The adviser is organized as a Delaware limited partnership whose sole general partner is Boston Partners, Inc., a Delaware corporation.
Subject to the supervision and direction of RBB's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objective and policies, makes investment decisions for the Fund, places orders to purchase and sell securities, and employs professional portfolio managers and securities analysts who provide research services to the Fund. For its services to the Fund, the Adviser is entitled to receive under the Advisory Agreement a monthly advisory fee computed at an annual rate of 0.75% of the Fund's average daily net assets. The Adviser is currently waiving advisory fees in excess of ____% of the Fund's average daily net assets.
Portfolio Management
The day-to-day portfolio management of the Fund is the responsibility of Mark E. Donovan and Wayne S. Sharp who are senior portfolio managers of the Adviser. Mr. Donovan is Chairperson of the Adviser's Equity Strategy Committee which oversees the investment activities of the Adviser's $___ billion of Large Capitalization Core Value institutional equity assets under management. Prior to joining the Adviser on April 16, 1995, Mr. Donovan was a Senior Vice President and Vice Chairman of The Boston Company Asset Management, Inc.'s
Equity Policy Committee. Mr. Donovan is a Chartered Financial Analyst and has over fifteen years of investment experience. Ms. Sharp is Vice Chairperson of the Adviser's Equity Strategy Committee and has over twenty-one years of investment experience. Prior to joining the Adviser on April 16, 1995, Ms. Sharp was a Senior Vice President and member of the Equity Policy Committee of The Boston Company Asset Management, Inc. Ms. Sharp is also a Chartered Financial Analyst.
Administrator
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. For its services, PFPC is entitled to receive a fee under an administration and accounting services agreement calculated at an annual rate of .125% of the Fund's average daily net assets with a minimum fee of $75,000 payable monthly on a pro rata basis.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank, National Association ("PNC Bank") serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. The principal offices of PFPC, an indirect, wholly-owned subsidiary of PNC Bank, are located at 400 Bellevue Parkway, Wilmington, Delaware 19809. PFPC may enter into shareholder servicing agreements with registered broker-dealers who have entered into dealer agreements with the Distributor ("Authorized Dealers") for the provision of certain shareholder support services to customers of such Authorized Dealers who are shareholders of the Fund. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc. ("PDI"), with offices at Four Falls Corporate Center, West Conshohocken, Pennsylvania 19428, acts as distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares.
Expenses
The expenses of the Fund are deducted from its total income before dividends are paid. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios. The Investor Class of the Fund pays its own distribution 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 Investor Class or if it receives different services.
The Adviser may assume expenses of the Fund from time to time. To the extent any service providers assume expenses of the Fund, such assumption of expenses will have the effect of lowering the Fund's overall expense ratio and increasing its yield to investors.
The Board of Directors of RBB has approved and adopted a Distribution Agreement and Plan of Distribution for the Shares (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Fund a distribution fee with respect to the Shares, which is accrued daily and paid monthly, of up to 0.25% on an annualized basis of the average daily net assets of the Shares. The actual amount of such compensation under the Plan is agreed upon by RBB's Board of Directors and by the Distributor in the Distribution Agreement. The Distributor may, in its discretion, from time to time waive voluntarily all or any Portion of its distribution fee.
Amounts paid to the Distributor under the Plan may be used by the
Distributor to cover expenses that are related to (i) the sale of the Shares,
(ii) ongoing servicing and/or maintenance of the accounts of Shareholders, and
(iii) sub-transfer agency services, subaccounting services or administrative
services related to the sale of the Shares, all as set forth in the Plan. The
Distributor may delegate some or all of these functions to Service Agents. See
"How to Purchase Shares--Purchases Through Intermediaries."
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Shares the fee agreed to under the Distribution Plan. Payments under the Plan are not tied exclusively to expenses actually incurred by the Distributor, and payments may exceed distribution expenses actually incurred.
Purchases Through Intermediaries.
Shares of the Fund may be available through certain brokerage firms, financial institutions and programs sponsored by other industry professionals (collectively, "Service Organizations"). Certain features of the Shares, such as the initial and subsequent investment minimums and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose transaction or administrative charges or other direct fees, which charges or fees would not be imposed if Shares are purchased directly from the Fund. Therefore, a client or customer should contact the Service Organization acting on his behalf concerning the fees (if any) charged in connection with a purchase or redemption of Shares and should read this Prospectus in light of the terms governing his accounts with the Service Organization. Service Organizations 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 Organizations 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 Organization 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 Organization, or, if applicable, its authorized designee, accepts a purchase or redemption order in good order. Orders received by the Fund in good order will be priced at the Fund's net asset value next computed after they are accepted by the Service Organization or its authorized designee.
For administration, subaccounting, transfer agency and/or other services, the Adviser or the Distributor or their affiliates may pay Service Organizations 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 Organizations or recordkeepers. The Service Fee payable to any one Service Organization or recordkeeper is determined based upon a number of factors, including the nature and quality of the services provided, the operations processing requirements of the relationship and the standardized fee schedule of the Service Organization or recordkeeper.
The Adviser, the Distributor or either of their affiliates may, at their own expense, provide promotional incentives for qualified recipients who support the sale of Shares consisting of securities dealers who have sold 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 one or more Boston Partners Funds. Travel, meals and lodging may also be paid 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 Shares.
General
Shares representing interests in the Fund are offered continuously for sale by the Distributor and may be purchased without imposition of a sales charge. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application to the Fund's transfer agent, PFPC. Purchases of Shares may be effected by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Boston Partners Large Cap Value Fund," c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. The name of the Fund, Boston Partners Large Cap Value Fund, must also appear on the check or Federal Reserve Draft. Shareholders may not purchase shares of the Boston Partners Large Cap Value Fund with a check issued by a third party and endorsed over to the Fund. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $2,500 and subsequent investments must be at least $100. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange, Inc. (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased is based on the net asset value next computed after a purchase order is received in good order by the Fund or its agents. Orders received by the Fund or its agents prior to the close of the NYSE (generally 4:00 p.m. Eastern Time) are priced at that Business Day's net asset value. Orders received by the Fund or its agents after the close of the NYSE are priced at the net asset value next determined on the following Business Day. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
Provided that the investment is at least $2,500, an investor may also purchase Shares by having his bank or her broker wire Federal Funds to PFPC. An investor's bank or broker may impose a charge for this service. The Fund does not currently impose a service charge for effecting wire transfers, but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 261-4073, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC Bank:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-1108-2507
FROM: (name of investor)
ACCOUNT NUMBER: (Investor's account number with the Fund)
FOR PURCHASE OF: Boston Partners Large Cap Value Fund
AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process redemptions until it receives a fully completed and signed application.
For subsequent investments, an investor should follow steps A and B above.
Automatic Investing
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account. Investors desiring to participate in the Automatic Investment Plan should call the Fund's transfer agent, PFPC, at (888) 261-4073 to obtain the appropriate forms.
Retirement Plans
Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as Custodian. For further information as to applications and annual fees, contact PFPC at (888) 261-4073. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption By Mail
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Boston Partners Large Cap Value Fund, c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. There is no charge for a redemption.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "How to Redeem and Exchange Shares -- Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Systematic Withdrawal Plan
If your account has a value of at least $10,000, you may establish a Systematic Withdrawal Plan and receive regular periodic payments. A request to establish a Systematic Withdrawal Plan must be submitted in writing to PFPC at P.O. Box 8852, Wilmington, Delaware 19899-8852. Each withdrawal redemption will be processed on or about the 25th of the month
and mailed as soon as possible thereafter. There are no service charges for maintenance, the minimum amount that you may withdraw each period is $100. (This is merely the minimum amount allowed and should not be mistaken for a recommended amount.) The holder of a Systematic Withdrawal Plan will have any income dividends and any capital gains distributions reinvested in full and fractional shares at net asset value. To provide funds for payment, Shares will be redeemed in such amount as is necessary at the redemption price, which is net asset value next determined after the Fund's receipt of a redemption request. Redemption of Shares may reduce or possibly exhaust the Shares in your account, particularly in the event of a market decline. As with other redemptions, a redemption to make a withdrawal payment is a sale for federal income tax purposes. Payments made pursuant to a Systematic Withdrawal Plan cannot be considered as actual yield or income since part of such payments may be a return of capital.
You will ordinarily not be allowed to make additional investments of less than the aggregate annual withdrawals under the Systematic Withdrawal Plan during the time you have the plan in effect and, while a Systematic Withdrawal Plan is in effect, you may not make periodic investments under the Automatic Investment Plan. You will receive a confirmation of each transaction showing the sources of the payment and the Share and cash balance remaining in your plan. The plan may be terminated on written notice by the shareholder or by the Fund and will terminate automatically if all Shares are liquidated or withdrawn from the account or upon the death or incapacity of the shareholder. You may change the amount and schedule of withdrawal payments or suspend such payments by giving written notice to the Fund's transfer agent at least seven Business Days prior to the end of the month preceding a scheduled payment.
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents of the request and any other necessary documents in proper order. Such payment may be postponed or the right of redemption suspended as permitted by the 1940 Act. 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, pending a determination that the check has cleared. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that it is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
Exchange Privilege
The exchange privilege is available to shareholders residing in any state in which the Shares being acquired may be legally sold. A shareholder may exchange Shares of the Fund for Investor Shares of any other Boston Partners Fund of RBB, subject to the restrictions described under "Exchange Privilege Limitations" below. Such exchange will be effected at the net asset value of the exchanged Fund and the net asset value of the Fund being acquired next determined after receipt of a request for an exchange by the Fund or its agents. An exchange of Shares will be treated as a sale for federal income tax purposes. See "Taxes." A shareholder wishing to make an exchange may do so by sending a written request to PFPC.
If the exchanging shareholder does not currently own Investor Shares of the Boston Partners Fund into which he would like to exchange, a new account will be established with the same registration, dividend and capital gain options as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted. The exchange privilege may be modified or terminated at any time, or from time to time, by RBB, upon 60 days' written notice to shareholders.
If an exchange is to a new account in the acquired Fund, the dollar value of Investor Shares acquired must equal or exceed that Fund's minimum for a new account; if to an existing account, the dollar value must equal or exceed that Fund's minimum for subsequent investments. If any amount remains in the Fund from which the exchange is being made, such amount must not drop below the minimum account value required by the Fund.
Exchange Privilege Limitations
The Fund's exchange privilege is not intended to afford shareholders a way to speculate on short-term movements in the market. Accordingly, in order to prevent excessive use of the exchange privilege that may potentially disrupt the management of the Fund and increase transactions costs, the Fund has established a policy of limiting excessive exchange activity.
Shareholders are entitled to six (6) exchange redemptions (at least 30 days apart) from the Fund during any twelve-month period. Notwithstanding these limitations, the Fund reserves the right to reject any purchase request (including purchases by exchange) that is deemed to be disruptive to efficient portfolio management.
Telephone Transactions
In order to request an exchange or redemption by telephone, a shareholder must have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC.
Once this election has been made, the shareholder may simply contact PFPC by telephone to request the exchange or redemption by calling (888) 261-4073. Neither RBB, the Fund, the Distributor, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures:
(1) requiring the appropriate telephone transaction privilege forms; (2)
requiring the caller to provide the names of the account owners, the account
social security number and name of the Fund, all of which must match RBB's
records; (3) requiring RBB's service representative to complete a telephone
transaction form, listing all of the above caller identification information;
(4) permitting exchanges only if the two account registrations are identical;
(5) requiring that redemption proceeds be sent only by check to the account
owners of record at the address of record, or by wire only to the owners of
record at the bank account of record; (6) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) Business Days of the call; and (7) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers (other
than the Distributor), financial institutions, securities dealers, financial
planners and other industry professionals, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by an
attorney-in-fact under a power of attorney.
The net asset value for each class of a fund is calculated by adding the value of the proportionate interest of the class in a fund's securities, cash and other assets, deducting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class is calculated independently from each other class. The net asset values are calculated as of 4:00 p.m. Eastern Time on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of RBB'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.
With the approval of RBB's Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed
discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually, and pays them in the calendar year in which they are declared, generally in December. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
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. 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) 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, whether such gain was reflected in the price paid for the shares, or whether such gain was attributable to bonds bearing tax-exempt interest. All other distributions, to the extent they are taxable, are taxed to shareholders as ordinary income.
RBB will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in 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 shares immediately prior to a distribution
will nevertheless be taxed on the entire amount of the distribution received, although the distribution is, in effect, a return of capital.
Shareholders who exchange shares representing interests in one Fund for shares representing interests in another Fund will generally recognize gain or loss for federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. federal income tax treatment.
The Fund offers two other classes of shares, Institutional Shares, which are offered directly to institutional investors, and Advisor Shares, which are offered primarily to investors seeking investment of funds held in an advisory or other similar capacity, pursuant to separate prospectuses. Shares of each class represent equal pro rata interests in the Fund and accrue dividends and calculate net asset value and performance quotations in the same manner. The Fund will quote performance of the Institutional Shares and Advisor Shares separately from Investor Shares. Because of different expenses paid by the Investor Shares, the total return on such shares can be expected. at any time, to be different than the total return on Institutional Shares or Advisor Shares. Information concerning these other classes may be obtained by calling the Fund at (800) 311-9783 or 9829.
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ____ billion shares are currently classified into ___ different classes of Common Stock. See "Description of Shares" in the Statement of Additional Information.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BOSTON PARTNERS LARGE CAP VALUE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE BOSTON PARTNERS LARGE CAP VALUE 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, even where a share has a different class designation than another share representing an interest in the Fund. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides
shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of Shares of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when RBB's Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of _________, 1998 to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to the Fund's transfer agent, PFPC, at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (888) 261-4073.
Share Certificates
In the interest of economy and convenience, physical certificates representing shares in the Fund are not normally issued.
Historical Performance Information
For the period from commencement of operations (January 16, 1997) through August 31, 1998, the total return since inception (not annualized) for the Investor Class of Shares of the Fund was as follows:
Unannualized investment returns for the period ended August 31, 1998
Since
Inception
---------
Boston Partners Large Cap Value Fund
(Investor Shares).......................................... _____%
|
The total return assumes the reinvestment of all dividends and capital gains and reflects expense reimbursements and investment advisory fee and 12b-1 fee waivers in effect. Without these expense reimbursements or waivers, the Fund's performance would have been lower. Of course, past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that Shares, when redeemed, may be worth more or less than the original cost. For more information on performance, see "Performance Information" in the Statement of Additional Information.
The table below presents the Composite performance history of certain of the Adviser's managed accounts on an annualized basis for the period ended August 31, 1998. The Composite is comprised of the Adviser's institutional accounts and other privately managed accounts with investment objectives, policies and strategies substantially similar to those of the Fund, although the accounts have longer operating histories than the Fund, which commenced operations on January 16, 1997. The Composite performance information includes the reinvestment of dividends received in the underlying securities and reflects the payment of investment advisory fees. The privately managed accounts in the Composite are only available to the Adviser's institutional advisory clients. The past performance of the funds and accounts which comprise the Composite is not indicative of or a substitute for the future performance of the Fund. These accounts have lower investment advisory fees than the Fund, and the Composite performance figures would have been lower if subject to the higher fees and expenses incurred by the Fund. These private accounts are also not subject to the same investment limitations, diversification requirements and other restrictions which are imposed upon mutual funds under the 1940 Act and the Internal Revenue Code, which, if imposed, may have adversely affected the performance results of the Composite. Listed below the performance history for the Composite is a comparative index comprised of securities similar to those in which accounts contained in the Composite are invested.
Annualized investment returns for the period ended August 31, 1998
Since
One Year Inception*
-------- ----------
Composite Performance................................ % %
S&P 500 Stock Index.................................. % %
|
* The Adviser commenced managing these accounts on June 1, 1995.
The S&P 500 Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the NYSE.
Future 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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as Business Week, Fortune, Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR PROSPECTUS
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
IN RBB'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED , 1998
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 RBB OR ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
------------------------
TABLE OF CONTENTS
Page
----
INTRODUCTION.......................................2 BOSTON PARTNERS
FINANCIAL HIGHLIGHTS...............................3 LARGE CAP
INVESTMENT OBJECTIVES AND POLICIES.................5 VALUE FUND
INVESTMENT LIMITATIONS.............................6 (Investor Shares)
RISK FACTORS.......................................7
MANAGEMENT.........................................8
DISTRIBUTION OF SHARES............................10
HOW TO PURCHASE SHARES............................11
HOW TO REDEEM AND EXCHANGE SHARES.................13
NET ASSET VALUE...................................16
DIVIDENDS AND DISTRIBUTIONS.......................17
TAXES.............................................17
MULTI-CLASS STRUCTURE.............................18
DESCRIPTION OF SHARES.............................18
OTHER INFORMATION.................................19
Investment Adviser
Boston Partners Asset Management, L.P.
Boston, Massachusetts
Custodian
PNC Bank, N.A.
Philadelphia, Pennsylvania
Transfer Agent and Administrator
PFPC Inc.
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania bp
BOSTON PARTNERS ASSET MANAGEMENT, L.P.
Counsel --------------------------------------
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants
|
Boston Partners Large Cap Value Fund bp
(Investor Class) BOSTON PARTNERS ASSET MANAGEMENT, L.P.
--------------------------------------
ACCOUNT APPLICATION
Please Note: Do not use this form to open a retirement plan account. For an IRA application or help with this Application, please
call 1-888-261-4073
(Please check the appropriate box(es) below.)
1.
Account
Registration:
|_| Individual |_| Joint Tenant |_| Other
---------------------------------------------------------------------------------------------------------
Name SOCIAL SECURITY NUMBER OR TAX ID # OF PRIMARY OWNER
---------------------------------------------------------------------------------------------------------
NAME OF JOINT OWNER JOINT OWNER SOCIAL SECURITY NUMBER OR TAX ID #
For joint accounts, the account registrants will be joint tenants with right of survivorship and not
tenants in common unless tenants in common or community property registrations are requested.
--------------
GIFT TO MINOR: |_| Uniform Gifts/Transfer to Minor's Act
--------------
---------------------------------------------------------------------------------------------------------
NAME OF ADULT CUSTODIAN (ONLY ONE PERMITTED)
---------------------------------------------------------------------------------------------------------
NAME OF MINOR (ONLY ONE PERMITTED)
---------------------------------------------------------------------------------------------------------
MINOR'S SOCIAL SECURITY NUMBER AND DATE OF BIRTH
-------------
CORPORATION,
PARTNERSHIP, TRUST
OR OTHER ENTITY:
-------------
---------------------------------------------------------------------------------------------------------
NAME OF CORPORATION, PARTNERSHIP, OR OTHER NAME(S) OF TRUSTEE(S)
---------------------------------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER
2.
Mailing
Address: ---------------------------------------------------------------------------------------------------------
STREET OR P.O. BOX AND/OR APARTMENT NUMBER
---------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
---------------------------------------------------------------------------------------------------------
DAY PHONE NUMBER EVENING PHONE NUMBER
3.
Investment
Information:
Minimum initial investment of $2,500 Amount of investment $____________
Make the check payable to Boston Partners Large Cap Value Fund.
Shareholders may not purchase shares of this Fund with a check issued by a third party and endorsed
over to the Fund.
-------------
DISTRIBUTION Note: Dividends and capital gains may be reinvested or paid by check. If not options are selected
OPTIONS: below, both dividends and capital gains will be reinvested in additional Fund shares.
-------------
Dividends |_| Pay by check |_| Reinvest |_| Capital Gains |_| Pay by check |_| Reinvest |_|
|
-------------
SYSTEMATIC To select this portion please fill out the information below:
WITHDRAWAL
PLAN: Amount__________________________________________ Startup Month ____________________________________
-------------
Frequency Options: Annually Monthly Quarterly
- A minimum account value of $10,000 in a single account is required to establish a Systematic
Withdrawal Plan
- Payments will be made on or near the 25th of the month
Please check one of the following options: _______ Please mail checks to Address of Record
(Named in Section 2)
_______ Please electronically credit my Bank of Record
(Named in Section 5)
4.
Telephone
Redemption:
To use this option, you must initial the appropriate line below.
I authorize the Transfer Agent to accept instructions from any persons to redeem or exchange shares in
my account(s) by telephone in accordance with the procedures and conditions set forth in the Fund's
current prospectus.
________________________ ____________________ Redeem shares, and send the proceeds to
individual initial joint initial the address of record.
________________________ ____________________ Exchange shares for shares of The Boston
individual initial joint initial Partners Mid Cap Value Fund, Bond Fund,
Micro Cap Value Fund, Market Neutral Fund
or Long-Short Equity Fund.
5.
Automatic The Account Investment Plan which is available to shareholders of the Fund, makes possible regularly
Investment scheduled purchases of Fund shares to allow dollar-cost averaging. The Fund's Transfer Agent can
Plan: arrange for an amount of money selected by you to be deducted from your checking account and used to
purchase shares of the Fund.
Please debit $________ from my checking account (named below on or about the 20th of the month. Please
attach an unsigned, voided check.
|_| Monthly |_| Every Alternate Month |_| Quarterly |_| Other
------------- ---------------------------------------------------------------------------------------------------------
BANK OF RECORD: BANK NAME STREET ADDRESS OR P.O. BOX
-------------
---------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
---------------------------------------------------------------------------------------------------------
BANK ABA NUMBER BANK ACCOUNT NUMBER
6.
Signatures
The undersigned warrants that I (we) have fully authority and, if a natural person, I (we) am (are)
of legal age to purchase shares pursuant to this Account Application, and I (we) have received a
current prospectus for the Fund in which I (we) am (are) investing. Under the Interest and Dividend Tax
Compliance Act of 1983, the Fund is required to have the following certification:
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a
number to be issued to), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have
not been notified by the Internal Revenue Service that I am subject to 31% backup withholding as a result
of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
Note: You must cross out item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because you have failed to report all interest and dividends on your tax
return. The Internal Revenue Service does not require your consent to any provision of this document
other than the certification required to audit backup withholding.
---------------------------------------------------------------------------------------------------------
SIGNATURE OF APPLICANT DATE
---------------------------------------------------------------------------------------------------------
PRINT NAME TITLE (IF APPLICABLE)
---------------------------------------------------------------------------------------------------------
SIGNATURE OF JOINT OWNER DATE
---------------------------------------------------------------------------------------------------------
PRINT NAME TITLE (IF APPLICABLE)
|
(If you are signing for a corporation, you must indicate corporate office or title. If you wish
additional signatories on the account, please include a corporate resolution. If signing as a fiduciary,
you must indicate capacity.)
For information on additional options, such as IRA Applications, rollover requests for qualified
retirement plans, or for wire instructions, please call us at 1-888-261-4073.
Mail completed Account Application and check to: The Boston Partners Large Cap Value Fund
c/o PFPC Inc.
P.O. Box 8852
Wilmington, DE 19899-8852
|
BOSTON PARTNERS LARGE CAP VALUE FUND
(Advisor Class)
of
The RBB Fund, Inc.
Boston Partners Large Cap Value Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares of the Advisor Class ("Shares") offered by this Prospectus represent interests in the Fund. The Fund is a diversified fund that seeks long-term growth of capital, with current income as a secondary objective, primarily through equity investments, such as common stocks and securities convertible into common stocks. It seeks to achieve its objectives by investing at least 65% of its total assets in a diversified portfolio consisting of equity securities of issuers with a market capitalization of primarily $1 billion or greater and identified by Boston Partners Asset Management, L.P. (the "Adviser") as equity securities that it believes possess value characteristics. The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
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 and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund by calling (800) 311-9783 or 9829. The Prospectus and the Statement of Additional Information are available for reference, along with other related material on the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS __________, 1998
RBB is an open-end management investment company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interests in the Boston Partners Large Cap Value Fund. RBB was incorporated in Maryland on February 29, 1988.
The Advisor Class of the Fund is designed primarily for investors seeking investment of funds held in an advisory or other similar capacity, which may include the investment of funds held or managed by broker-dealers, investment counselors and financial planners. Investment professionals such as those listed above may purchase Shares for discretionary or non-discretionary accounts maintained by individuals.
EXPENSE TABLE
The following table illustrates the annual operating expenses expected to be incurred by Advisor Shares of the Fund (after fee waivers) for the fiscal period ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (after waivers)*.....................................................................____%
12b-1 Fees (after waivers)*..........................................................................____%
Other Expenses.......................................................................................____%
Total Fund Operating Expenses (after waivers)........................................................ %
====
|
* In the absence of fee waivers, Management Fees would be 0.75%, 12b-1 Fees would be 0.75% and Total Fund Operating Expenses would be ____%. Management Fees and 12b-1 Fees are each based on average daily net assets and are calculated daily and paid monthly.
Example
An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
Boston Partners Large Cap
Value Fund............................... $ $ $ $
|
The 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 the various costs and expenses, see "Management" and "Distribution of Shares" below.) The Fee Table reflects a voluntary waiver of Management fees and 12b-1 Fees for the Fund. However, the Adviser and the Distributor are under no obligation with respect to such waivers, and there can be no assurance that any future waivers of Management Fees and 12b-1 Fees will not vary from the figures reflected in the Fee Table.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers Inc.
No financial data is supplied for the Advisor Class of the Fund because, as of the date of this Prospectus, the Advisor Class had no performance history.
The Fund's investment objective is to provide long-term growth of capital with current income as a secondary objective. The Fund seeks to achieve its objective by investing at least 65% of its total assets in a diversified portfolio consisting primarily of equity securities, such as common stocks and securities convertible into common stocks, of issuers with a market capitalization of $1 billion or greater and identified by the Adviser as possessing value characteristics.
The Adviser examines various factors in determining the value characteristics of such issuers, including but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
The Adviser selects securities for the Fund based on a continuous study of trends in industries and companies, earnings power and growth and other investment criteria. In general, the Fund's investments are broadly diversified over a number of industries and, as a matter of policy, the Fund will not invest 25% or more of its total assets in any one industry.
The Fund may invest up to 20% of its total assets in securities of foreign issuers. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operated in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. 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 assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates.
There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. See "Investment Objectives and Policies--Foreign Securities" in the Statement of Additional Information.
The Fund may invest the remainder of its total assets in equity securities of issuers with lower capitalization; derivative securities; debt securities issued by U.S. banks, corporations and other business organizations that are investment grade securities; and debt securities issued by the U.S. Government or government agencies.
In accordance with the above-mentioned policies, the Fund may also invest in indexed securities, convertible securities, repurchase and reverse repurchase agreements, dollar rolls, financial futures contracts, options on futures contracts and may lend portfolio securities. See "Investment Objectives and Policies" in the Statement of Additional Information.
The Fund may invest in registered investment companies and investment funds in foreign countries subject to the provisions of the Investment Company Act of 1940 (the "1940 Act") and as discussed in "Investment Objectives and Policies" in the Statement of Additional Information. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
While the Adviser intends to fully invest the Fund's assets at all times in accordance with the above mentioned policies, the Fund reserves the right to hold up to 100% of its assets, as a temporary defensive measure, in cash and eligible U.S. dollar-denominated money market instruments. The Adviser will determine when market conditions warrant temporary defensive measures.
The Fund's investment objective and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in the Fund.
The Fund may not change the following investment limitations without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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.
If a percentage restriction under one of the Fund's investment policies or restrictions or the use of assets is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
As with other mutual funds, there can be no assurance that the Fund will achieve its objective. The net asset value per share of Shares representing interests in the Fund will fluctuate as the values of its portfolio securities change in response to changing conditions in the equity market. An investment in the Fund is not intended to constitute a balanced investment program. Other risk factors are discussed above under "Investment Objectives and Policies" and in the Statement of Additional Information under "Investment Objectives and Policies."
European Currency Unification. Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Fund may invest and may result in the Fund facing additional risks in pursuing its investment objective. These risks, which include, but are not limited to, uncertainty as to the proper tax
treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of the Fund's net asset value per share.
Year 2000. The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on the Adviser's provision of investment advisory services, including the handling of securities trades pricing. Both the Adviser and PFPC have advised RBB that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that the Adviser or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
General. Investment methods described in this Prospectus are among those that the Fund has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
Board of Directors
The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors.
Investment Adviser
Boston Partners Asset Management, L.P., located at 28 State Street, 21st Floor, Boston, Massachusetts 02109, serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other institutional accounts that had aggregate total assets under management as of ____________, 1998, in excess of $____ billion. The adviser is organized as a Delaware limited partnership whose sole general partner is Boston Partners, Inc., a Delaware corporation.
Subject to the supervision and direction of RBB's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objective and policies, makes investment decisions for the Fund, places orders to purchase and sell securities, and employs professional portfolio managers and securities analysts who provide research services to the Fund. For its services to the Fund, the Adviser is entitled to receive under the Advisory Agreement a monthly advisory fee computed at an annual rate of 0.75% of the Fund's average
daily net assets. The Adviser is currently waiving advisory fees in excess of ____% of the Fund's average daily net assets.
Portfolio Management
The day-to-day portfolio management of the Fund is the responsibility of Mark E. Donovan and Wayne S. Sharp who are senior portfolio managers of the Adviser. Mr. Donovan is Chairperson of the Adviser's Equity Strategy Committee which oversees the investment activities of the Adviser's $___ billion of Large Capitalization Core Value institutional equity assets under management. Prior to joining the Adviser on April 16, 1995, Mr. Donovan was a Senior Vice President and Vice Chairman of The Boston Company Asset Management, Inc.'s Equity Policy Committee. Mr. Donovan is a Chartered Financial Analyst and has over fifteen years of investment experience. Ms. Sharp is Vice Chairperson of the Adviser's Equity Strategy Committee and has over twenty years of investment experience. Prior to joining the Adviser on April 16, 1995, Ms. Sharp was a Senior Vice President and member of the Equity Policy Committee of The Boston Company Asset Management, Inc. Ms. Sharp is also a Chartered Financial Analyst.
Administrator
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. For its services, PFPC receives a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank, National Association ("PNC Bank") serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. The principal offices of PFPC, an indirect, wholly-owned subsidiary of PNC Bank, are located at 400 Bellevue Parkway, Wilmington, Delaware 19809. PFPC may enter into shareholder servicing agreements with registered broker-dealers who have entered into dealer agreements with the Distributor ("Authorized Dealers") for the provision of certain shareholder support services to customers of such Authorized Dealers who are shareholders of the Fund. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc. ("PDI"), with a principal business address at Four Falls Corporate Center, West Conshohocken, Pennsylvania 19428, acts as distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares.
Expenses
The expenses of the Fund are deducted from its total income before dividends are paid. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios. The Advisor Class of the Fund pays its own distribution 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.
The Adviser may assume expenses of the Fund from time to time. In certain circumstances, it 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 lowering the Fund's overall expense ratio and increasing its yield to investors.
The Board of Directors of RBB has approved and adopted a Distribution Agreement and Plan of Distribution for the Shares (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Fund a distribution fee with respect to the Shares, which is accrued daily and paid monthly, of up to 0.75% on an annualized basis of the average daily net assets of the Shares. The actual amount of such compensation under the Plan is agreed upon by RBB's Board of Directors and by the Distributor. Under the Distribution Agreement, the Distributor has agreed to accept compensation for its services thereunder and under the Plan in the amount of 0.50% of the average daily net assets of the Fund on an annualized basis in any year. Such compensation may be increased, up to the amount permitted in the Plan with the approval of RBB's Board of Directors. The Distributor may, in its discretion, from time to time waive voluntarily all or any portion of its distribution fee.
Amounts paid to the Distributor under the Plan may be used by the
Distributor to cover expenses that are related to (i) the sale of the Shares,
(ii) ongoing servicing and/or maintenance of the accounts of Shareholders, and
(iii) sub-transfer agency services, subaccounting services or administrative
services related to the sale of the Shares, all as set forth in the Plan. The
Distributor may delegate some or all of these functions to an Intermediary, as
defined below. See "Shareholder Servicing."
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Shares the fee agreed to under the Distribution Plan. Payments under the Plan are not tied exclusively to expenses actually incurred by the Distributor, and payments may exceed distribution expenses actually incurred.
The Adviser, the Distributor or either of their affiliates may, at their own expense, provide promotional incentives for qualified recipients who support the sale of Shares, consisting of securities dealers who have sold 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 one or more Boston Partners Funds. Travel, meals and lodging may also be paid 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 Shares.
General
Advisor Shares are available for investment through investment professionals such as broker-dealers, financial planners and other financial intermediaries ("Intermediaries"). The Fund reserves the right to make Advisor Shares available to other investors in the future.
Shares representing interests in the Fund are offered continuously for sale by the Distributor and may be purchased through an Intermediary without imposition of a sales charge. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application through an Intermediary to the Fund's transfer agent, PFPC. Purchases of Shares may be effected through an Intermediary or by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Boston Partners Large Cap Value Fund," c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. The name of the Fund, Boston Partners Large Cap Value Fund, must also appear on the check or Federal Reserve Draft. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $10,000 and subsequent investments must be at least $500. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange, Inc. (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased is based on the net asset value next computed after a purchase order is received in good order by the Fund or its agents. Orders received by the Fund or its agents prior to the close of the NYSE (generally 4:00 p.m. Eastern Time) are priced at that Business Day's net asset value. Orders received by the Fund or its agents after the close of the NYSE are priced at the net asset value next determined on the following Business Day. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
Shareholders whose shares are held in the street name account of an Intermediary and who desire to transfer such shares to the street name account of another Intermediary should contact their current Intermediary.
Shareholders may not purchase shares of the Boston Partners Large Cap Value Fund with a check issued by a third party and endorsed over to the Fund. Checks for investment must be made payable to Boston Partners Large Cap Value Fund.
Provided that the investment is at least $2,500, an investor may also purchase Shares by having his bank or his broker wire Federal Funds to PFPC. An investor's bank or broker may impose a charge for this service. The Fund does not currently impose a service charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 261-4073, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-1108-2507
FROM: (name of investor)
ACCOUNT NUMBER: (Investors account number with the Fund) FOR PURCHASE OF: Boston Partners Large Cap Value Fund AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process redemptions until it receives a fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B above.
Automatic Investing
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account. Investors desiring to participate in the automatic investing program should call the Fund's transfer agent, PFPC, at (888) 261-4073 to obtain the appropriate forms.
Retirement Plans
Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact PFPC at (888) 261-4073. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption by Mail
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Boston Partners Large Cap Value Fund, c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. There is no charge for a redemption. Shareholders may also place redemption requests through an Intermediary, but such Intermediary might charge a fee for this service.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "How to Redeem Shares -- Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Systematic Withdrawal Plan
If your account has a value of at least $10,000, you may establish a Systematic Withdrawal Plan and receive regular periodic payments. A request to establish a Systematic Withdrawal Plan must be submitted in writing to PFPC at P.O. Box 8852, Wilmington, Delaware 19899-8852. Each withdrawal redemption will be processed about the 25th of the month and mailed as soon as possible thereafter. There are no service charges for maintenance; the minimum amount that you may withdraw each period is $100. (This is merely the minimum amount allowed and should not be mistaken for a recommended amount.) The holder of a Systematic Withdrawal Plan will have any income dividends and any capital gains distributions reinvested in full and fractional shares at net asset value. To provide funds for payment, Shares will be redeemed in such amount as is necessary at the redemption price, which is net asset value next determined after the Fund's receipt of a redemption request. Redemption of Shares may reduce or possibly exhaust the Shares in your account, particularly in the event of a market decline. As with other redemptions, a redemption to make a withdrawal payment is a sale for
federal income tax purposes. Payments made pursuant to a Systematic Withdrawal Plan cannot be considered as actual yield or income since part of such payments may be a return of capital.
You will ordinarily not be allowed to make additional investments of less than the aggregate annual withdrawals under the Systematic Withdrawal Plan during the time you have the plan in effect and, while a Systematic Withdrawal Plan is in effect, you may not make periodic investments under Automatic Investing. You will receive a confirmation of each transaction showing the sources of the payment and the share and cash balance remaining in your plan. The plan may be terminated on written notice by the shareholder or by the Fund and will terminate automatically if all Shares are liquidated or withdrawn from the account or upon the death or incapacity of the shareholder. You may change the amount and schedule of withdrawal payments or suspend such payments by giving written notice to the Fund's transfer agent at least seven Business Days prior to the end of the month preceding a scheduled payment.
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents of the request and any other necessary documents in proper order. Such payment may be postponed or the right of redemption suspended as permitted by the rules of the SEC. If the Shares to be redeemed have been recently purchased by check, the Fund's transfer agent may delay mailing a redemption check, which may be a period of up to 15 days, pending a determination that the check has cleared. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that a portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
Telephone Transactions
In order to request a redemption by telephone, a shareholder must have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the redemption by calling (888) 261-4073. Neither RBB, the Fund, the Distributor, the Administrator nor any Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures:
(1) requiring the appropriate telephone transaction privilege forms; (2)
requiring the caller to provide the names of the account owners, the account
social security number and name of the Fund, all of which must match RBB's
records; (3) requiring RBB's service representative to complete a telephone
transaction form, listing all of the above caller identification information;
(4) requiring that redemption proceeds be sent only by check to the account
owners of record at the address of record, or by wire only to the owners of
record at the bank account of record; (5) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) Business Days of the call; and (6) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers (other
than the Distributor), financial institutions, securities dealers, financial
planners and other industry professionals, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by an
attorney-in-fact under a power of attorney.
The net asset values for each class of a fund are calculated by adding the value of the proportionate interest of the class in a fund's securities, cash and other assets, deducting the actual and accrued liabilities of the class and dividing by the result of outstanding Shares of the class. The net asset values of each class are calculated independently from each other class. The net asset values are calculated as of 4:00 p.m. Eastern Time on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of
RBB'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.
With the approval of RBB's Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually, and pays them in the calendar year in which they are declared, generally in December. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
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. 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) 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, whether such gain was reflected in the price paid for the Shares, or whether such gain was attributable to bonds bearing tax-exempt interest. All other distributions, to the extent they are taxable, are taxed to shareholders as ordinary income.
RBB will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in 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 shares just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received.
Shareholders who exchange shares representing interests in one Fund for shares representing interests in another Fund will generally recognize capital gain or loss for federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. federal income tax treatment.
The Fund is authorized to offer Advisor Shares to Intermediaries whose clients or customers (collectively, "Customers") are beneficial owners of Advisor Shares. Those Intermediaries may enter into service agreements ("Agreements") related to the sale of the Advisor Shares with the Distributor pursuant to the Distribution Plan. Pursuant to the terms of an Agreement, the Intermediary agrees to perform certain distribution, shareholder servicing, administrative and accounting services for its Customers. Distribution services would be marketing or other services in connection with the promotion and sale of Advisor Shares. Shareholder services that may be provided include responding to Customer inquiries, providing information on Customer investments and providing other shareholder liaison services. Administrative and accounting services related to the sale of the Advisor Shares may include (i) aggregating and processing purchase and redemption requests from Customers and placing net purchase and redemption orders with the Fund's transfer agent, (ii) processing dividend payments from the Fund on behalf of Customers and (iii) providing subaccounting relating to the sale of Advisor Shares beneficially owned by Customers or the information to the Fund necessary for subaccounting. Pursuant to the Rule 12b-1 Plan for the Advisor Shares, the Distributor may pay each participating Intermediary a negotiated fee on an annual basis not to exceed .75% of the value of the average daily net assets of its Customers invested in the Advisor Shares. The Fund may, in the future, enter into additional Agreements with Intermediaries. The Board of Directors of RBB will evaluate the appropriateness of the Plan on a continuing basis.
The Fund offers two other classes of shares which are offered directly to individual investors, Investor Shares and Institutional Shares, pursuant to separate prospectuses. Shares of each class represent equal pro rata interests in the Fund and accrue dividends and calculate net asset value and performance quotations in the same manner. The Fund quotes performance of
the Investor and Institutional Shares separately from Advisor Shares. Because of different expenses paid by the Advisor Shares, the total return on such shares can be expected, at any time, to be different than the total return on Investor and Institutional Shares. Information concerning these other classes may be obtained by calling the Fund at (800) 311-9783, or 9829.
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock. See "Description of Shares" in the Statement of Additional Information."
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO BOSTON PARTNERS LARGE CAP VALUE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO BOSTON PARTNERS LARGE CAP VALUE 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, even where a share has a different class designation than another share representing an interest in the Fund. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
Holders of Shares of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when RBB's Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ___________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to the Fund's transfer agent, PFPC, at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, (888) 261-4073.
Share Certificates
In the interest of economy and convenience, physical certificates representing shares in the Fund are not normally issued.
Historical Performance Information
The table below presents the Composite performance history of certain of the Adviser's managed accounts on an annualized basis for the period ended August 31, 1998 The Composite is comprised of the Adviser's institutional accounts and other privately managed accounts with investment objectives, policies and strategies substantially similar to those of the Fund, although the accounts have longer operating histories than the Advisor Class of the Fund, which had not offered shares to the public as of August 31, 1998 The Composite performance information includes the reinvestment of dividends received in the underlying securities and reflects investment advisory fees. The privately managed accounts in the Composite are only available to the Adviser's institutional advisory clients. The past performance of the funds and accounts which comprise the Composite is not indicative of the future performance of the Advisor Class of the Fund. These accounts have lower investment advisory fees than the Advisor Class of the Fund, and the Composite performance would have been lower if subject to the higher fees and expenses incurred by the Advisor Class of the Fund. These private accounts are also not subject to the same investment limitations, diversification requirements and other restrictions which are imposed upon mutual funds under the 1940 Act, and the Internal Revenue Code, which, if imposed, may have adversely affected the performance results of the Composite. Listed below the performance history for the Composite is a comparative index comprised of securities similar to those in which accounts contained in the Composite are invested.
Annualized investment returns for the period ended August 31, 1998
Since
One Year Inception*
-------- ----------
Composite Performance............................................ ____% ____%
S&P 500 Stock Index.............................................. ____% ____%
|
* The Adviser commenced managing these accounts on June 1, 1995.
The S&P 500 Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the NYSE.
Future 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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as Business Week, Fortune, Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'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 RBB OR ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
-------------------
PROSPECTUS
__________, 1998
TABLE OF CONTENTS
Page
----
INTRODUCTION...............................................2
INVESTMENT OBJECTIVES AND POLICIES.........................3
INVESTMENT LIMITATIONS.....................................4
RISK FACTORS...............................................5
MANAGEMENT.................................................6
DISTRIBUTION OF SHARES.....................................8 BOSTON PARTNERS
HOW TO PURCHASE SHARES.....................................9 LARGE CAP
HOW TO REDEEM SHARES......................................11 VALUE FUND
NET ASSET VALUE...........................................13
DIVIDENDS AND DISTRIBUTIONS...............................13 (Advisor Shares)
TAXES.....................................................14
SHAREHOLDER SERVICING.....................................15
MULTI-CLASS STRUCTURE.....................................15
DESCRIPTION OF SHARES.....................................15
OTHER INFORMATION.........................................16
Investment Advisor
Boston Partners Asset Management, L.P.
Boston, Massachusetts
Custodian
PNC Bank, N.A.
Philadelphia, Pennsylvania
Transfer Agent and Administrator
PFPC Inc.
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania
Counsel bp
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants BOSTON PARTNERS
ASSET MANAGEMENT, L.P.
-----------------------------------------
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Boston Partners Large Cap Value Fund
(Advisor Class)
ACCOUNT APPLICATION
Please Note: Do not use this form to open a retirement plan account. For an IRA application or help with this Application,
please call 1-888-261-4073
(Please check the appropriate box(es) below.)
1. Account Registration:
|_| Individual |_| Joint Tenant |_| Other
---------------------------------------------------------------------------------------------------------
Name SOCIAL SECURITY NUMBER OR TAX ID # OF PRIMARY OWNER
---------------------------------------------------------------------------------------------------------
NAME OF JOINT OWNER JOINT OWNER SOCIAL SECURITY NUMBER OR TAX ID #
For joint accounts, the account registrants will be joint tenants with right of survivorship and not
tenants in common unless tenants in common or community property registrations are requested.
GIFT TO MINOR: Uniform Gifts/Transfer to Minor's Act
---------------------------------------------------------------------------------------------------------
NAME OF ADULT CUSTODIAN (ONLY ONE PERMITTED)
---------------------------------------------------------------------------------------------------------
NAME OF MINOR (ONLY ONE PERMITTED)
---------------------------------------------------------------------------------------------------------
MINOR'S SOCIAL SECURITY NUMBER AND DATE OF BIRTH
CORPORATION,
PARTNERSHIP, TRUST
OR OTHER ENTITY:
---------------------------------------------------------------------------------------------------------
NAME OF CORPORATION, PARTNERSHIP, OR OTHER NAME(S) OF TRUSTEE(S)
---------------------------------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER
2. Mailing Address: ---------------------------------------------------------------------------------------------------------
STREET OR P.O. BOX AND/OR APARTMENT NUMBER
---------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
---------------------------------------------------------------------------------------------------------
DAY PHONE NUMBER EVENING PHONE NUMBER
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3. Investment Information: Minimum initial investment of $10,000. Amount of investment $____________
Make the check payable to Boston Partners Large Cap Value Fund.
Shareholders may not purchase shares of this Fund with a check issued by a third party and endorsed
over to the Fund.
DISTRIBUTION NOTE: Dividends and capital gains may be reinvested or paid by check. If no options are selected
OPTIONS: below, both dividends and capital gains will be reinvested in additional Fund shares.
Dividends |_| Pay by check |_| Reinvest |_| Capital Gains |_| Pay by check |_| Reinvest |_|
|
SYSTEMATIC To select this portion please fill out the information below:
WITHDRAWAL
PLAN: Amount__________________________________________ Start-up Month ____________________________________
Frequency Options: |_| Annually |_| Monthly |_| Quarterly
- A minimum account value of $10,000 in a single account is required to establish a Systematic
Withdrawal Plan
- Payments will be made on or near the 25th of the month
Please check one of the following options: _______ Please mail checks to Address of Record
(Named in Section 2)
_______ Please electronically credit my Bank of Record
(Named in Section 5)
4. Telephone Redemption:
To use this option, you must initial the appropriate line below.
I authorize the Transfer Agent to accept instructions from any persons
to redeem or exchange shares in my account(s) by telephone in
accordance with the procedures and conditions set forth in the Fund's current prospectus.
________________________ ____________________ Redeem shares, and send the proceeds to
individual initial joint initial the address of record.
5. Automatic Investment
Plan: The Account Investment Plan which is available to shareholders of the Fund, makes possible regularly
scheduled purchases of Fund shares to allow dollar-cost averaging. The Fund's Transfer Agent can
arrange for an amount of money selected by you to be deducted from your checking account and used to
purchase shares of the Fund.
Please debit $________ from my checking account (named below) on or about the 20th of the month. Please
attach an unsigned, voided check.
|_| Monthly |_| Every Alternate Month |_| Quarterly |_| Other
---------------------------------------------------------------------------------------------------------
BANK OF RECORD: BANK NAME STREET ADDRESS OR P.O. BOX
---------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
---------------------------------------------------------------------------------------------------------
BANK ABA NUMBER BANK ACCOUNT NUMBER
6. Signatures: The undersigned warrants that I (we) have full authority and, if a natural person, I (we) am (are)
of legal age to purchase shares pursuant to this Account Application, and I (we) have received a
current prospectus for the Fund in which I (we) am (are) investing.
Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is required to have the following
certification:
Under penalties of perjury, I certify that:
|
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a
number to be issued to), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have
not been notified by the Internal Revenue Service that I am subject to 31% backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
Note: You must cross out item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because you have failed to report all interest and dividends on your tax
return. The Internal Revenue Service does not require your consent to any provision of this document
other than the certification required to audit backup withholding.
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SIGNATURE OF APPLICANT DATE
---------------------------------------------------------------------------------------------------------
PRINT NAME TITLE (IF APPLICABLE)
---------------------------------------------------------------------------------------------------------
SIGNATURE OF JOINT OWNER DATE
---------------------------------------------------------------------------------------------------------
PRINT NAME TITLE (IF APPLICABLE)
(If you are signing for a corporation, you must indicate corporate office or title. If you wish
additional signatories on the account, please include a corporate resolution. If signing as a fiduciary,
you must indicate capacity.)
For information on additional options, such as IRA Applications, rollover requests for qualified
retirement plans, or for wire instructions, please call us at 1-888-261-4073.
Mail completed Account Application and check to: The Boston Partners Large Cap Value Fund
c/o PFPC Inc.
P.O. Box 8852
Wilmington, DE 19899-8852
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BOSTON PARTNERS MID CAP VALUE FUND
(Institutional Shares)
of
The RBB Fund, Inc.
Boston Partners Mid Cap Value Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares of the Institutional Class ("Shares") offered by this Prospectus represent interests in the Fund. The Fund is a diversified fund that seeks long-term growth of capital, with current income as a secondary objective, primarily through equity investments, such as common stocks. It seeks to achieve its objectives by investing at least 65% of its total assets in a diversified portfolio consisting of equity securities of issuers with a market capitalization of primarily between $200 million and $4 billion, and identified by Boston Partners Asset Management, L.P. (the "Adviser") as equity securities that it believes possess value characteristics. The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
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 and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund by calling (800) 311-9783 or 9829. The Prospectus and the Statement of Additional Information are available for reference, along with other related materials, on the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS _____________, 1998
EXPENSE TABLE
The following table illustrates annual operating expenses incurred by Institutional Shares of the Fund (after fee waivers and expense reimbursements) for the period ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees (after waivers)*......................................................................___%
12b-1 Fees ..........................................................................................0.00%
Other Expenses (after waivers and expense reimbursements)*............................................___%
Total Fund Operating Expenses (after waivers and
expense reimbursements)*....................................................................1.00%
====
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* In the absence of fee waivers and expense reimbursements, Management Fees would be 0.80%; Other Expenses would be ___% and Total Fund Operating Expenses would be ___%. Management Fees are based on average daily net assets and are calculated daily and paid monthly.
Example
An investor would pay the following expenses on a $1,000 investment in the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each time period:
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
Boston Partners Mid Cap Value Fund $ $ $ $
|
The 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 the various costs and expenses, see "Management" below.) The Fee Table reflects expense reimbursements and voluntary waivers of Management Fees and administrative services fees for the Fund, which are expected to be in effect during the current fiscal year. However, the Adviser, the Administrative Services Agent and the Fund's other service providers are under no obligation with respect to such expense reimbursements and waivers and there can be no assurance that any future expense reimbursements and waivers of Management Fees will not vary from the figures reflected in the Fee Table.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The "Financial Highlights" presented below set forth certain investment results for shares of the Institutional Class of the Fund for the period June 2, 1997 (date of inception) through August 31, 1997 and for the fiscal year ended August 31, 1998. The financial data included in this table should be read in conjunction with the financial statements and notes thereto and the unqualified report of ____________________________, RBB's independent accountant, which are incorporated by reference into the Statement of Additional Information. Further information about the performance of the Institutional Class of the Fund is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on page 1 of the prospectus.
BOSTON PARTNERS MID CAP VALUE FUND
(For an Institutional Share outstanding throughout each period)
For the Period
For the Fiscal June 2, 1997*
Year Ended through
August 31, 1998 August 31, 1997
--------------- ---------------
Per Share Operating Performance**
Net asset value, beginning of period................................. $ 10.00
------
Net investment income (1)............................................ .01
Net realized and unrealized gain on investments(2)................... 1.00
-----
Net increase in net assets resulting
from operations.................................................... 1.01
Net asset value, end of period....................................... $ 11.01
=======
Total investment return(3)........................................... 10.10%
Ratios/Supplemental Data
Net assets, end of period (000)...................................... $3,750
Ratio of expenses to average net
assets***(1)(4).................................................... 1.00%
Ratio of net investment income to
average net assets***(1)........................................... 1.08%
Portfolio turnover rate****.......................................... 21.80%
Average commission rate per share(5)................................. $0.0348
|
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
period, except for dividends and distributions, if any, which are based
on actual shares outstanding on the dates of distributions.
*** Annualized.
**** Not annualized.
(1) Reflects waivers and reimbursements.
(2) The amount shown for a share outstanding throughout the period is not
in accord with the change in the aggregate gains and losses in
investments during the period because of the timing of sales and
repurchases of Fund shares in relation to fluctuating net asset value
during the period.
(3) Total return is calculated assuming a purchase of shares on the first
day and a sale of shares on the last day of the period reported and
will include reinvestments of dividends and distributions, if any.
Total return is not annualized.
(4) Until May 29, 1998, the Institutional Class of the Fund paid .03% of
its average daily net assets to the Fund's previous Distributor in
12b-1 fees. From May 29, 1998
through August 31, 1998, the Institutional Class of the Fund paid .03%
of its average daily net assets to the Administrative Services Agent
pursuant to the Administrative Services Plan for Institutional Shares,
in lieu of 12b-1 fees. Without the waiver of advisory, 12b-1,
administrative services, administration and transfer agent fees and
without the reimbursement of certain operating expenses, the ratio of
expenses to average net assets annualized for the period ended August
31, 1997 and the year ended August 31, 1998 would have been 12.37% and
___%, respectively, for the Institutional Class.
(5) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period subject to such
commissions.
RBB is an open-end management investment company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interest in the Boston Partners Mid Cap Value Fund. RBB was incorporated in Maryland on February 29, 1988.
The Fund's investment objective is to provide long-term growth of capital with current income as a secondary objective. The Fund seeks to achieve its objective by investing, under normal market conditions, at least 65% of its total assets in a diversified portfolio consisting primarily of equity securities such as common stocks of issuers with a market capitalization of between $200 million and $4 billion and identified by the Adviser as equity securities that it believes possess value characteristics.
The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
The Adviser selects securities for the Fund based on a continuous study of trends in industries and companies, earning power and growth and other investment criteria. In general, the Fund's investments are broadly diversified over a number of industries and, as a matter of policy, the Fund will not invest 25% or more of its total assets in any one industry.
The Fund may invest up to 20% of its total assets in securities of foreign issuers. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operating in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. 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 assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities
and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. See "Investment Objective and Policies--Foreign Securities" in the Statement of Additional Information.
The Fund may invest the remainder of its total assets in equity securities of issuers with lower or higher capitalizations; derivative securities; debt securities issued by U.S. banks, corporations and other business organizations that are investment grade securities; and debt securities issued by the U.S. government or government agencies.
In accordance with the above-mentioned policies, the Fund may also invest in indexed securities, repurchase agreements, reverse repurchase agreements, dollar rolls, financial futures contracts, options on futures contracts and may lend portfolio securities. See "Investment Objectives and Policies" in the Statement of Additional Information.
The Fund may invest in registered investment companies and investment funds in foreign countries subject to the provisions of the Investment Company Act of 1940, as amended (the "1940 Act"), and as discussed in "Investment Objectives and Policies" in the Statement of Additional Information. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
While the Adviser intends to fully invest the Fund's assets at all times in accordance with the above-mentioned policies, the Fund reserves the right to hold up to 100% of its assets, as a temporary defensive measure, in cash and eligible U.S. dollar-denominated money market instruments. The Adviser would determine when market conditions warrant temporary defensive measures.
The Fund's investment objectives and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in the Fund.
The Fund may not change the following investment limitations without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of
such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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.
If a percentage restriction under one of the Fund's investment policies or restrictions or the use of assets is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
As with other mutual funds, there can be no assurance that the Fund will achieve its objective. The net asset value per share of Shares representing an interest in the Fund will fluctuate as the values of its portfolio securities change in response to changing conditions in the equity market. An investment in the Fund is not intended to constitute a balanced investment program. Other risk factors are discussed above under "Investment Objective and Policies" and in the Statement of Additional Information under "Investment Objective and Policies."
European Currency Unification. Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Fund may invest and may result in the Fund facing additional risks in pursuing its investment objective. These risks, which include, but are not limited to, uncertainty as to
the proper tax treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of the Fund's net asset value per share.
Year 2000. The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on the Adviser's provision of investment advisory services, including the handling of securities trades pricing. Both the Adviser and PFPC have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that the Adviser or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
General. Investment methods described in this Prospectus are among those which the Fund has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
Board of Directors
The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors.
Investment Adviser
Boston Partners Asset Management, L.P., located at 28 State Street, 21st Floor, Boston, Massachusetts 02109, serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other institutional accounts that had aggregate total assets under management as of ______, 1998 in excess of $____ billion. The adviser is organized as a Delaware limited partnership whose sole general partner is Boston Partners, Inc., a Delaware corporation.
Subject to the supervision and direction of the Fund's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objective and policies, makes investment decisions for the Fund, places orders to purchase and sell securities, and employs professional portfolio managers and securities analysts who provide research services to the Fund. For its services to the Fund, the Adviser is paid a monthly advisory fee
computed at an annual rate of 0.80% of the Fund's average daily net assets. The Adviser has notified RBB, however, that it intends to waive advisory fees in excess of .___% during the current fiscal year.
Portfolio Management
The day-to-day portfolio management of the Fund is the responsibility of Wayne J. Archambo who is senior portfolio manager of the Adviser and a member of the Adviser's Equity Strategy Committee. Mr. Archambo oversees the investment activities of the Advisers' $____ million of mid-capitalization value and $____ million of small cap value institutional equity assets under management. Prior to joining the Adviser in April 1995, Mr. Archambo was employed by The Boston Company Asset Management from 1989 through April 1995 where he was a senior portfolio manager and a member of the firm's Equity Policy Committee. Mr. Archambo has over 15 years of investment experience and is a Chartered Financial Analyst.
Administrator
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. For its services, PFPC receives a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank, National Association ("PNC Bank") serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. The principal offices of PFPC, an indirect, wholly-owned subsidiary of PNC Bank, are located at 400 Bellevue Parkway, Wilmington, Delaware 19809.
Administrative Services Agent
Provident Distributors, Inc. ("PDI") provides certain administrative services to the Fund's Institutional Shares not otherwise provided by PFPC. PDI's principal business address is Four Falls Corporate Center, West Conshohocken, Pennsylvania 19428. PDI furnishes certain internal quasi-legal, executive and administrative services to the Fund, acts as a liaison between the Fund and its various service providers and coordinates and assists in the preparation of reports prepared on behalf of the Fund. For its services, PDI is entitled to a monthly fee calculated at the annual rate of .15% of the respective average daily net assets of the Fund's Institutional Class. PDI is currently waiving fees in excess of .03% of the average daily net assets of the Fund's Institutional Class.
Distributor
PDI acts as distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares.
Expenses
The expenses of the Fund are deducted from its total income before dividends are paid. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios. The Institutional Class of the Fund pays an administrative services fee, and may pay a different share than the Investor Class of other expenses (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by the Institutional Class or if it receives different services.
The Adviser may assume expenses of the Fund from time to time. To the extent any service providers assume expenses of the Fund, such assumption of expenses will have the effect of lowering the Fund's overall expense ratio and increasing its yield to investors.
General
Shares representing an interest in the Fund are offered continuously for sale by the Distributor. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application to the Fund's transfer agent, PFPC. Purchases of Shares may be effected by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Boston Partners Mid Cap Value Fund," c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. The name of the Fund, Boston Partners Mid Cap Value Fund, must also appear on the check or Federal Reserve Draft. Shareholders may not purchase shares of the Boston Partners Mid Cap Value Fund with a check issued by a third party and endorsed over to the Fund. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $100,000 and subsequent investments must be at least $5,000. For purposes of meeting the minimum initial purchase, clients which are part of endowments, foundation or other related groups may be aggregated. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange, Inc. (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased is based on the net asset value next computed after a purchase order is received in good order by the Fund or its agents. Orders received by the Fund or its agents prior to the close of the NYSE (generally 4:00 p.m. Eastern Time) are priced at that Business Day's net asset value. Orders received by the Fund or its agents after its close of the NYSE are priced at the net asset value next determined on the following Business Day. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
Shares may be purchased and subsequent investments may be made by principals and employees of the Adviser, and by their spouses and children, either directly or through their individual retirement accounts, and by any pension and profit-sharing plan of the Adviser, without being subject to the minimum investment limitations.
An investor may also purchase Shares by having his bank or his broker wire Federal Funds to PFPC. An investor's bank or broker may impose a charge for this service. The Fund does not currently impose a service charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 261-4073, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-1108-2507
FROM: (name of investor)
ACCOUNT NUMBER: (Investor's account number with the Fund)
FOR PURCHASE OF: (name of the Fund)
AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process purchases until it receives a fully completed and signed application.
For subsequent investments, an investor should follow steps A and B above.
Automatic Investing
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account. Investors desiring to participate in the automatic investing program should call the Fund's transfer agent, PFPC, at (888) 261-4073 to obtain the appropriate forms.
Redemption by Mail
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Boston Partners Mid Cap Value Fund, c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. There is no charge for a redemption.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents 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 1940 Act. 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, pending a determination that the
check has cleared. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that a portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
Exchange Privilege
The exchange privilege is available to shareholders residing in any state in which the Shares being acquired may be legally sold. A shareholder may exchange Shares of the Fund for Institutional Shares of any other Boston Partners Fund of RBB, subject to restrictions described under "Exchange Privilege Limitations" below. Such exchange will be effected at the net asset value of the exchanged Fund and the net asset value of the Fund being acquired next determined after receipt of a request for an exchange by the Fund or its agents. An exchange of Shares will be treated as a sale for federal income tax purposes. See "Taxes." A shareholder wishing to make an exchange may do so by sending a written request to PFPC.
If the exchanging shareholder does not currently own Institutional Shares of the Fund into which he would like to exchange, a new account will be established with the same registration, dividend and capital gain options as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted. The exchange privilege may be modified or terminated at any time, or from time to time, by RBB, upon 60 days' written notice to shareholders.
If an exchange is to a new account in the acquired Fund, the dollar value of Shares acquired must equal or exceed that Fund's minimum for a new account; if to an existing account, the dollar value must equal or exceed that Fund's minimum for subsequent investments. If any amount remains in the Fund from which the exchange is being made, such amount must not drop below the minimum account value required by the Fund.
Exchange Privilege Limitations
The Fund's exchange privilege is not intended to afford shareholders a way to speculate on short-term movements in the market. Accordingly, in order to prevent excessive use of the exchange privilege that may potentially disrupt the management of the Fund and increase transactions costs, the Fund has established a policy of limiting excessive exchange activity.
Shareholders are entitled to six (6) exchange redemptions (at least 30 days apart) from the Fund during any twelve-month period. Notwithstanding these limitations, the Fund reserves the right to reject any purchase request (including purchases by exchange) that is deemed to be disruptive to efficient portfolio management.
Telephone Transactions
In order to request a telephone exchange or redemption, a shareholder must have completed and returned an account application containing a telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the exchange or redemption by calling (888) 261-4073. Neither RBB, the Fund, the Distributor, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures:
(1) requiring the appropriate telephone transaction privilege forms; (2)
requiring the caller to provide the names of the account owners, the account
social security number and name of the Fund, all of which must match RBB's
records; (3) requiring RBB's service representative to complete a telephone
transaction form, listing all of the above caller identification information;
(4) permitting exchanges only if the two account registrations are identical;
(5) requiring that redemption proceeds be sent only by check to the account
owners of record at the address of record, or by wire only to the owners of
record at the bank account of record; (6) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) Business Days of the call; and (7) maintaining tapes of
telephone transactions for six months, if the fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers (other
than the Distributor), financial institutions, securities dealers, financial
planners and other industry professionals, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by an
attorney-in-fact under a power of attorney.
The net asset value for each class of a fund is calculated by adding the value of the proportionate interest of the class in a fund's cash, securities and other assets, deducting actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class is calculated independently of each other class. The net asset values are calculated as of the close of regular trading on the NYSE, generally 4:00 p.m. Eastern Time on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily
available are valued at fair market value as determined in good faith by or under the direction of RBB'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.
With the approval of RBB's Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually and pays them in the calendar year in which they are declared, generally in December. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
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. 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) 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 gains regardless of the length of time a shareholder has held his Shares, whether such gain was reflected in the price paid for the Shares, or whether such gain was attributable to bonds bearing tax-exempt interest. All other distributions, to the extent they are taxable, are taxed to shareholders as ordinary income.
RBB will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in 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 shares just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received, although the distribution is, in effect, a return of capital.
Shareholders who exchange shares representing interests in one Fund for shares representing interests in another Fund will generally recognize capital gain or loss for federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. Federal income tax treatment.
The Fund offers one other class of shares, Investor Shares, which are offered directly to individual investors pursuant to a separate prospectus. Shares of each class represent equal pro rata interests in the Fund and accrue dividends and calculate net asset value and performance quotations in the same manner. The Fund will quote performance of the Investor Shares separately from Institutional Shares. Because of different expenses paid by the Institutional Shares, the total return on such shares can be expected, at any time, to be different than the total return on Investor Shares. Information concerning these other classes may be obtained by calling the Fund at (800) 311-9783 or 9829.
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ____ billion shares are currently classified into ____ different classes of Common Stock. See "Description of Shares" in the Statement of Additional Information."
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO BOSTON PARTNERS MID CAP VALUE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO BOSTON PARTNERS MID CAP VALUE 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, even where a share has a different class designation than another share representing an interest in the Fund. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB 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, RBB will assist in shareholder 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. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of __________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC Inc., the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (888) 261-4073.
Share Certificates
In the interest of economy and convenience, physical certificates representing Shares in the Fund are not normally issued.
Historical Performance Information
For the period from commencement of operations (June 2, 1997) through August 31, 1998, the total return (not annualized) for the Institutional Class of Shares of the Fund was as follows:
Unannualized investment returns for the period ended August 31, 1998.
Since
Inception
---------
Boston Partners Mid Cap Value Fund
(Institutional Shares)..................................................... _____%
|
The total return assumes the reinvestment of all dividends and capital gains and reflects expense reimbursements and investment advisory fee waivers in effect. Without these expense reimbursements or waivers, the Fund's performance would have been lower. Of course, past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that Shares, when redeemed, may be worth more or less than the original cost. For more information on performance, see "Performance Information" in the Statement of Additional Information.
The table below presents the Composite performance history of certain of the Adviser's managed accounts on an annualized basis for the period ended August 31, 1998. The Composite is comprised of the Adviser's institutional accounts and other privately managed accounts with investment objectives, policies and strategies substantially similar to those of the Fund, although the accounts have longer operating histories than the Fund, which commenced operations on June 2, 1997. The Composite performance information includes the reinvestment of dividends received in the underlying securities and includes payment of investment advisory fees. The privately managed accounts in the Composite are only available to the Adviser's institutional advisory clients. The past performance of the accounts which comprise the Composite is not indicative of the future performance of the Fund. These accounts have lower investment advisory fees than the Fund and the Composite performance figures would have been lower if subject to the higher fees and expenses incurred by the Fund. These private accounts are not subject to the same investment limitations, diversification requirements and other restrictions which are imposed upon mutual funds under the 1940 Act and the Internal Revenue Code, which, if imposed, may have adversely affected the performance results of the Composite. Listed below the performance history for the Composite is a comparative index comprised of securities similar to those in which accounts contained in the Composite are invested.
Annualized investment returns for the period ended August 31, 1998.
One Three Since
Year Years Inception*
---- ----- ----------
Composite Performance ____% ____% ___%
Russell 2500 Index ____% ____% ___%
|
* The Adviser commenced managing these accounts on May 1, 1995.
The Russell 2500 Index represents the largest 3,000 companies domiciled in the United States minus the largest 500 companies as determined by the market value of such companies.
Future 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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Russell 2500 Index. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as Business Week, Fortune, Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
[THIS PAGE INTENTIONALLY LEFT BLANK]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY PROSPECTUS
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'S
STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY _____________, 1998
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 RBB OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
RBB OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
Page
----
FINANCIAL HIGHLIGHTS....................................3 BOSTON PARTNERS
INTRODUCTION............................................5 MID CAP
INVESTMENT OBJECTIVES AND POLICIES......................5 VALUE FUND
INVESTMENT LIMITATIONS..................................6
RISK FACTORS............................................7 (Institutional Shares)
MANAGEMENT..............................................7
DISTRIBUTION OF SHARES..................................9
HOW TO PURCHASE SHARES.................................10
HOW TO REDEEM AND EXCHANGE SHARES......................12
NET ASSET VALUE........................................14
DIVIDENDS AND DISTRIBUTIONS............................15
TAXES..................................................15
MULTI-CLASS STRUCTURE..................................16
DESCRIPTION OF SHARES..................................16
OTHER INFORMATION......................................17
Investment Adviser
Boston Partners Asset Management, L.P.
Boston, Massachusetts
Custodian
PNC Bank, N.A.
Philadelphia, Pennsylvania
Transfer Agent and Administrator
PFPC Inc.
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants bp
BOSTON PARTNERS ASSET MANAGEMENT, L.P.
--------------------------------------
|
Boston Partners Mid Cap Value Fund bp
(Institutional Class) BOSTON PARTNERS ASSET MANAGEMENT, L.P.
--------------------------------------
ACCOUNT APPLICATION
Please Note: Do not use this form to open a retirement plan account. For an IRA application or help with this Application,
please call 1-888-261-4073
(Please check the appropriate box(es) below.)
1. Account Registration:
|_| Individual |_| Joint Tenant |_| Other
---------------------------------------------------------------------------------------------------------
Name SOCIAL SECURITY NUMBER OR TAX ID # OF PRIMARY OWNER
---------------------------------------------------------------------------------------------------------
NAME OF JOINT OWNER JOINT OWNER SOCIAL SECURITY NUMBER OR TAX ID #
For joint accounts, the account registrants will be joint tenants with right of survivorship and not
tenants in common unless tenants in common or community property registrations are requested.
GIFT TO MINOR: Uniform Gifts/Transfer to Minor's Act
---------------------------------------------------------------------------------------------------------
NAME OF ADULT CUSTODIAN (ONLY ONE PERMITTED)
---------------------------------------------------------------------------------------------------------
NAME OF MINOR (ONLY ONE PERMITTED)
---------------------------------------------------------------------------------------------------------
MINOR'S SOCIAL SECURITY NUMBER AND DATE OF BIRTH
CORPORATION,
PARTNERSHIP, TRUST
OR OTHER ENTITY:
---------------------------------------------------------------------------------------------------------
NAME OF CORPORATION, PARTNERSHIP, OR OTHER NAME(S) OF TRUSTEE(S)
---------------------------------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER
2. Mailing Address: ---------------------------------------------------------------------------------------------------------
STREET OR P.O. BOX AND/OR APARTMENT NUMBER
---------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
---------------------------------------------------------------------------------------------------------
DAY PHONE NUMBER EVENING PHONE NUMBER
|
3. Investment Information: Minimum initial investment of $100,000 Amount of investment $____________
Make the check payable to Boston Partners Large Cap Value Fund.
Shareholders may not purchase shares of this Fund with a check issued by a third party and endorsed
over to the Fund.
DISTRIBUTION Note: Dividends and capital gains may be reinvested or paid by check. If no options are selected
OPTIONS: below, both dividends and capital gains will be reinvested in additional Fund shares.
Dividends |_| Pay by check |_| Reinvest |_| Capital Gains |_| Pay by check |_| Reinvest |_|
|
4. Telephone Redemption:
To use this option, you must initial the appropriate line below.
I authorize the Transfer Agent to accept instructions from any persons
to redeem or exchange shares in my account(s) by telephone in
accordance with the procedures and conditions set forth in the Fund's current prospectus.
________________________ ____________________ Redeem shares, and send the proceeds to
individual initial joint initial the address of record.
________________________ ____________________ Exchange shares for shares of The Boston
individual initial joint initial Partners Large Cap Value Fund, Bond Fund,
Micro Cap Value Fund, Market Neutral
Fund or Long-Short Equity Fund.
5. Automatic Investment
Plan: The Account Investment Plan which is available to shareholders of the Fund, makes possible regularly
scheduled purchases of Fund shares to allow dollar-cost averaging. The Fund's Transfer Agent can
arrange for an amount of money selected by you to be deducted from your checking account and used to
purchase shares of the Fund.
Please debit $________ from my checking account (named below) on or about the 20th of the month. Please
attach an unsigned, voided check.
|_| Monthly |_| Every Alternate Month |_| Quarterly |_| Other
---------------------------------------------------------------------------------------------------------
BANK OF RECORD: BANK NAME STREET ADDRESS OR P.O. BOX
---------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
---------------------------------------------------------------------------------------------------------
BANK ABA NUMBER BANK ACCOUNT NUMBER
6. Signatures
The undersigned warrants that I (we) have full authority and, if a natural person, I (we) am (are)
of legal age to purchase shares pursuant to this Account Application, and I (we) have received a
current prospectus for the Fund in which I (we) am (are) investing.
Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is required to have the following
certification:
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a
number to be issued to), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have
not been notified by the Internal Revenue Service that I am subject to 31% backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
Note: You must cross out item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because you have failed to report all interest and dividends on your tax
return. The Internal Revenue Service does not require your consent to any provision of this document
other than the certification required to audit backup withholding.
---------------------------------------------------------------------------------------------------------
SIGNATURE OF APPLICANT DATE
---------------------------------------------------------------------------------------------------------
PRINT NAME TITLE (IF APPLICABLE)
---------------------------------------------------------------------------------------------------------
SIGNATURE OF JOINT OWNER DATE
---------------------------------------------------------------------------------------------------------
PRINT NAME TITLE (IF APPLICABLE)
(If you are signing for a corporation, you must indicate corporate office or title. If you wish
additional signatories on the account, please include a corporate resolution. If signing as a fiduciary,
you must indicate capacity.)
For information on additional options, such as IRA Applications, rollover requests for qualified
retirement plans, or for wire instructions, please call us at 1-888-261-4073.
Mail completed Account Application and check to: The Boston Partners Mid Cap Value Fund
c/o PFPC Inc.
P.O. Box 8852
Wilmington, DE 19899-8852
|
BOSTON PARTNERS MID CAP VALUE FUND
(Investor Class)
of
The RBB Fund, Inc.
Boston Partners Mid Cap Value Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares of the Investor Class ("Shares") offered by this Prospectus represent interests in the Fund. The Fund is a diversified fund that seeks long-term growth of capital, with current income as a secondary objective, primarily through equity investments, such as common stocks. It seeks to achieve its objectives by investing at least 65% of its total assets in a diversified portfolio consisting of equity securities of issuers with a market capitalization of primarily between $200 million and $4 billion, and identified by Boston Partners Asset Management, L.P. (the "Adviser") as equity securities that it believes possess value characteristics. The Adviser examines various factors in determining the value characteristics of such issuers, including but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
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 and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund by calling (800) 311-9783 or 9829. The Prospectus and the Statement of Additional Information are available for reference, along with other related material on the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS __________ , 1998
EXPENSE TABLE
The following table illustrates annual operating expenses incurred by Investor Shares of the Fund (after fee waivers and expense reimbursements) for the fiscal period ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees (after waivers)*................... %
-------
12b-1 Fees (after waivers)*........................ %
-------
Other Expenses..................................... %
-------
Total Fund Operating Expenses (after waivers
and expense reimbursements)*..................... %
=======
|
* In the absence of fee waivers and expense reimbursements, Management Fees would be 0.80%; 12b-1 Fees would be 0.25%; Other Expenses would be ____%; and Total Fund Operating Expenses would be ____%. Management Fees and 12b-1 Fees are each based on average daily net assets and are calculated daily and paid monthly.
Example
An investor would pay the following expenses on a $1,000 investment in the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each time period:
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
Boston Partners Mid Cap Value Fund $ $ $ $
==== ==== ==== ====
|
The 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 the various costs and expenses, see "Management" and "Distribution of Shares" below.) The Fee Table reflects expense reimbursements and a voluntary waiver of Management Fees for the Fund, which are expected to be in effect during the current fiscal year. However, the Adviser and the Fund's service providers are under no obligation with respect to such fee waivers and expense reimbursements and there can be no assurance that any future expense reimbursements and waivers of Management Fees will not vary from the figures reflected in the Fee Table.
The "Financial Highlights" presented below set forth certain investment results for shares of the Investor Class of the Fund for the period June 2, 1997 (date of inception) through August 31, 1997 and for the fiscal year ended August 31, 1998. The financial data included in
this table should be read in conjunction with the financial statements and notes thereto and the unqualified report of _________________________________, RBB's independent accountants, which are incorporated by reference into the Statement of Additional Information. Further information about the performance of the Investor Class of the Fund is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on page 1 of the prospectus.
BOSTON PARTNERS MID CAP VALUE FUND
(For an Investor Share outstanding throughout each period)
For the Period
For the Fiscal June 2, 1997*
Year Ended through
August 31, 1998 August 31, 1997
--------------- ---------------
Per Share Operating Performance** $ 10.00
------
Net asset value, beginning of period.............................
Net investment income (1)........................................ .01
Net realized and unrealized gain on
investments(2)................................................... 1.00
-----
Net increase in net assets resulting
from operations.................................................. 1.01
Net asset value, end of period................................... $ 11.01
======
Total investment return(3)....................................... 10.10%
Ratios/Supplemental Data
Net assets, end of period (000).................................. $598
Ratio of expenses to average net
assets***(1)(4)................................................ 1.10%
Ratio of net investment income to
average net assets***(1)....................................... .61%
Portfolio turnover rate****...................................... 21.80%
Average commission rate per share(5)............................. $0.0348
|
(2) The amount shown for a share outstanding throughout the period is not
in accord with the change in the aggregate gains and losses in
investments during the period because of the timing of sales and
repurchases of Fund shares in relation to fluctuating net asset value
during the period.
(3) Total return is calculated assuming a purchase of shares on the first
day and a sale of shares on the last day of the period reported and
will include reinvestments of dividends and distributions, if any.
Total return is not annualized.
(4) Without the waiver of advisory 12b-1, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratio of expenses to average net assets annualized for the period ended August 31, 1997 and the year ended August 31, 1998 would have been 12.62% and __%, respectively, for the Investor Class.
(5) Computed by dividing the total amount of commissions paid by the total number of shares purchased and sold during the period subject to such commissions.
RBB is an open-end management investment company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interests in the Boston Partners Mid Cap Value Fund. RBB was incorporated in Maryland on February 29, 1988.
The Fund's investment objectives are to provide long-term growth of capital with current income as a secondary objective. The Fund seeks to achieve its objectives by investing, under normal market conditions, at least 65% of its total assets in a diversified portfolio consisting primarily of equity securities such as common stocks of issuers with a market capitalization of between $200 million and $4 billion, and identified by the Adviser as equity securities that it believes possess value characteristics.
The Adviser examines various factors in determining the value characteristics of such issuers, including but not limited to price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
The Adviser selects securities for the Fund based on a continuous study of trends in industries and companies, earnings power and growth and other investment criteria. In general, the Fund's investments are broadly diversified over a number of industries and, as a matter of policy, the Fund will not invest 25% or more of its total assets in any one industry.
The Fund may invest up to 20% of its total assets in securities of foreign issuers. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operating in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. 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 assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. See "Investment Objectives and Policies--Foreign Securities" in the Statement of Additional Information.
The Fund may invest the remainder of its total assets in equity securities of issuers with lower or higher capitalizations; derivative securities; debt securities issued by U.S. banks, corporations and other business organizations that are investment grade securities; and debt securities issued by the U.S. Government or government agencies.
In accordance with the above-mentioned policies, the Fund may also invest in indexed securities, repurchase agreements, reverse repurchase agreements, dollar rolls, financial futures contracts, options on futures contracts and may lend portfolio securities. See "Investment Objectives and Policies" in the Statement of Additional Information.
The Fund may invest in registered investment companies and investment funds in foreign countries subject to the provisions of the Investment Company Act of 1940, as amended (the "1940 Act") and as discussed in "Investment Objectives and Policies" in the Statement of Additional Information. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
While the Adviser intends to fully invest the Fund's assets at all times in accordance with the above-mentioned policies, the Fund reserves the right to hold up to 100% of its assets, as a temporary defensive measure, in cash and eligible U.S. dollar-denominated money market instruments. The Adviser would determine when market conditions warrant temporary defensive measures.
The Fund's investment objectives and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in the Fund.
The Fund may not change the following investment limitations without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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.
If a percentage restriction under one of the Fund's investment policies or restrictions or the use of assets is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
As with other mutual funds, there can be no assurance that the Fund will achieve its objective. The net asset value per share of Shares representing interests in the Fund will fluctuate as the values of its portfolio securities change in response to changing conditions in the equity market. An investment in the Fund is not intended to constitute a balanced investment program. Other risk factors are discussed above under "Investment Objectives and Policies" and in the Statement of Additional Information under "Investment Objectives and Polices."
European Currency Unification
Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Fund may invest and may result in the Fund facing additional risks in pursuing its investment objective. These risks, which include, but are not limited to, uncertainty as to the proper tax treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of the Fund's net asset value per share.
Year 2000
The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on the Adviser's provision of investment advisory services, including the handling of securities trades pricing. Both the Adviser and PFPC have advised RBB that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that the Adviser or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
General
Investment methods described in this Prospectus are among those which the Fund has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
Board of Directors
The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors.
Investment Adviser
Boston Partners Asset Management, L.P., located at 28 State Street, 21st Floor, Boston, Massachusetts 02109, serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other institutional accounts that had aggregate total assets under management as of ________, 1998, in excess of $____ billion. The adviser is organized as a Delaware limited partnership whose sole general partner is Boston Partners, Inc., a Delaware corporation.
Subject to the supervision and direction of RBB's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objectives and policies, makes investment decisions for the Fund, places orders to purchase and sell securities, and employs professional portfolio managers and securities analysts who provide research services to the Fund. For its services to the Fund, the Adviser is paid a monthly advisory fee computed at an annual rate of 0.80% of the Fund's average daily net assets. The Adviser has notified RBB, however, that it intends to waive advisory fees in excess of ___% of the Fund's average daily net assets during the current fiscal year.
Portfolio Management
The day-to-day portfolio management of the Fund is the responsibility of Wayne J. Archambo who is a senior portfolio manager of the Adviser and a member of the Adviser's Equity Strategy Committee. Mr. Archambo oversees the investment activities of the Adviser's $____ million of mid-capitalizations value and $___ million of small cap value institutional equity assets under management. Prior to joining the Adviser in April 1995, Mr. Archambro was employed by The Boston Company Asset Management from 1989 through April 1995 where he was a senior portfolio manager and a member of the Firm's Equity Policy Committee. Mr. Archambro has over 16 years of investment experience and is a Chartered Financial Analyst.
Administrator
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. For its services, PFPC receives a fee calculated at an annual rate of .125% of the Fund's average daily net assets with a minimum annual fee of $75,000 payable monthly on a pro rata basis.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank, National Association ("PNC Bank") serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. The principal offices of PFPC, an indirect, wholly-owned subsidiary of PNC Bank, are located at 400 Bellevue Parkway, Wilmington, Delaware 19809. PFPC may enter into shareholder servicing agreements with registered broker-dealers who have entered into dealer agreements with the Distributor ("Authorized Dealers") for the provision of certain shareholder support services to customers of such Authorized Dealers who are shareholders of the Fund. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc. (the "Distributor"), with a principal business address at Four Falls Corporate Center, West Conshohocken, Pennsylvania 19428, acts as distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares.
Expenses
The expenses of the Fund are deducted from its total income before dividends are paid. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios. The Investor Class of the Fund pays its own distribution fees, and may pay a different share than the Institutional Class of other expenses (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by the Investor Class or if it receives different services.
The Adviser may assume expenses of the Fund from time to time. To the extent any service providers assume expense of the Fund, such assumption of expenses will have the effect of lowering the Fund's overall expense ratio and increasing its yield to investors.
The Board of Directors of RBB has approved and adopted a Distribution Agreement and Plan of Distribution for the Shares (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Fund a distribution fee with respect to the shares, which is accrued daily and paid monthly, of up to 0.25% on an annualized basis of the average daily net assets of the Shares. The actual amount of such compensation under the Plan is agreed upon by RBB's Board of Directors and by the Distributor in the Distribution Agreement. The Distributor may, in its discretion, from time to time waive voluntarily all or any portion of its distribution fee.
Amounts paid to the Distributor under the Plan may be used by the
Distributor to cover expenses that are related to (i) the sale of the Shares,
(ii) ongoing servicing and/or maintenance of the accounts of Shareholders, and
(iii) sub-transfer agency services, subaccounting services or administrative
services related to the sale of the Shares, all as set forth in the Plan. The
Distributor may delegate some or all of these functions to Service Agents. See
"How to Purchase Shares -- Purchases Through Intermediaries."
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Shares the fee agreed to under the Distribution Agreement. Payments under the Plan are not tied exclusively to expenses actually incurred by the Distributor and the payments may exceed distribution expenses actually incurred.
Purchases Through Intermediaries
Shares of the Fund may be available through certain brokerage firms, financial institutions and other industry professionals (collectively, "Service Organizations"). Certain features of the Shares, such as the initial and subsequent investment minimums and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose transaction or administrative charges or other direct fees, which charges and fees would not be imposed if Shares are purchased directly from the Fund. Therefore, a client or customer should contact the Service Organization acting on his behalf concerning the fees (if any) charged in connection with a purchase or redemption of Shares and should read this Prospectus in light of the terms governing his accounts with the Service Organization. Service Organizations will be responsible for promptly transmitting client or customer purchase and redemption orders to the Fund in accordance with their agreements with the Fund and with clients or customers. Service Organizations 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 Organization 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 Organization, or, if applicable, its authorized designee, accepts a purchase or redemption order in good order. Orders received by the Fund in good order will be priced at the Fund's net asset value next computed after they are accepted by the Service Organization or its authorized designee.
For administration, subaccounting, transfer agency and/or other services, Boston Partners, the Distributor or their affiliates may pay Service Organizations and certain recordkeeping organizations a fee of up to .35% (the "Service Fee") of the average annual value of accounts with the Fund maintained by such Service Organizations or recordkeepers. The Service Fee payable to any one Service Organization is determined based upon a number of factors, including the nature and quality of services provided, the operations processing requirements of the relationship and the standardized fee schedule of the Service Organization or recordkeeper.
The Adviser, the Distributor or either of their affiliates may, at their own expense, provide promotional incentives for qualified recipients who support the sale of Shares, consisting
of securities dealers who have sold 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 one or more Boston Partners Funds. Travel, meals and lodging may also be paid 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 Shares.
General
Shares representing interests in the Fund are offered continuously for sale by the Distributor and may be purchased without imposition of a sales charge. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application to the Fund's transfer agent, PFPC. Purchases of Shares may be effected by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Boston Partners Mid Cap Value Fund," c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. The name of the Fund, Boston Partners Mid Cap Value Fund, must also appear on the check or Federal Reserve Draft. Shareholders may not purchase shares of the Boston Partners Mid Cap Value Fund with a check issued by a third party and endorsed over to the fund. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $2,500 and subsequent investments must be at least $100. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange, Inc. (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased is based on the net asset value next computed after a purchase order is received in good order by the Fund or its agents. Orders received by the Fund or its agents prior to the close of the NYSE (generally 4:00 p.m. Eastern Time) are priced at that Business Day's net asset value. Orders received by the Fund or its agents after the close of the NYSE are priced at the net asset value next determined on the following Business Day. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
Provided that the investment is at least $2,500, an investor may also purchase Shares by having his bank or his broker wire Federal Funds to PFPC. The Fund does not currently impose a service charge for effecting wire transfers, but reserves the right to do so in the future. An investor's bank or broker may impose a charge for this service. In order to ensure prompt receipt of an investor's Federal Funds wire for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 261-4073, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-1108-2507
FROM: (name of investor)
ACCOUNT NUMBER: (Investor's account number with the Fund) FOR PURCHASE OF: Boston Partners Mid Cap Value Fund AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process purchases until it receives a fully completed and signed application.
For subsequent investments, an investor should follow steps A and B above.
Automatic Investing
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account. Investors desiring to participate in the Automatic Investment Plan should call the Fund's transfer agent, PFPC, at (888)261-4073 to obtain the appropriate forms.
Retirement Plans
Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Fund's transfer agent, PFPC, at (888) 261-4073. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption By Mail
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Boston Partners Mid Cap Value Fund, c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. There is no charge for a redemption.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Systematic Withdrawal Plan
If your account has a value of at least $10,000, you may establish a Systematic Withdrawal Plan and receive regular periodic payments. A request to establish a Systematic Withdrawal Plan must be submitted in writing to PFPC at P.O. Box 8852, Wilmington, Delaware 19899-8852. Each withdrawal redemption will be processed on or about the 25th of the month and mailed as soon as possible thereafter. There are no service charges for maintenance; the minimum amount that you may withdraw each period is $100. (This is merely the minimum amount allowed and should not be mistaken for a recommended amount.) The holder of a Systematic Withdrawal Plan will have any income dividends and any capital gains distributions reinvested in full and fractional shares at net asset value. To provide funds for payment, Shares will be redeemed in such amount as is necessary at the redemption price, which is net asset value next determined after the Fund's receipt of a redemption request. Redemption of Shares may reduce or possibly exhaust the Shares in your account, particularly in the event of a market decline. As with other redemptions, a redemption to make a withdrawal payment is a sale for federal income tax purposes. Payments made pursuant to a Systematic Withdrawal Plan cannot be considered as actual yield or income since part of such payments may be a return of capital.
You will ordinarily not be allowed to make additional investments of less than the aggregate annual withdrawals under the Systematic Withdrawal Plan during the time you have the plan in effect and, while a Systematic Withdrawal Plan is in effect, you may not make periodic investments under the Automatic Investment Plan. You will receive a confirmation of each transaction showing the sources of the payment and the Share and cash balance remaining
in your plan. The plan may be terminated on written notice by the shareholder or by the Fund and will terminate automatically if all Shares are liquidated or withdrawn from the account or upon the death or incapacity of the shareholder. You may change the amount and schedule of withdrawal payments or suspend such payments by giving written notice to the Fund's transfer agent at least seven Business Days prior to the end of the month preceding a scheduled payment.
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents of the request and any other necessary documents in proper order. Such payment may be postponed or the right of redemption suspended as permitted by the 1940 Act. 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, pending a determination that the check has cleared. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that it is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
Exchange Privilege
The exchange privilege is available to shareholders residing in any state in which the Shares being acquired may be legally sold. A shareholder may exchange Shares of the Fund for Investor Shares of any other Boston Partners Fund RBB subject to the restrictions described under "Exchange Privilege Limitations." Such exchange will be effected at the net asset value of the exchanged Fund and the net asset value of the Fund being acquired next determined after receipt of a request for an exchange by the Fund or its agents. An exchange of Shares will be treated as a sale for federal income tax purposes. See "Taxes." A shareholder wishing to make an exchange may do so by sending a written request to PFPC.
If the exchanging shareholder does not currently own Investor Shares of the Fund into which he would like to exchange, a new account will be established with the same registration, dividend and capital gain options as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees
that are not part of these programs will not be accepted. The exchange privilege may be modified or terminated at any time, or from time to time, by RBB, upon 60 days' written notice to shareholders.
If an exchange is to a new account in the acquired Fund, the dollar value of Investor Shares acquired must equal or exceed the Fund's minimum for a new account; if to an existing account, the dollar value must equal or exceed that Fund's minimum for subsequent investments. If any amount remains in the Fund from which the exchange is being made, such amount must not drop below the minimum account value required by the Fund.
Exchange Privilege Limitations
The Fund's exchange privilege is not intended to afford shareholders a way to speculate on short-term movements in the market. Accordingly, in order to prevent excessive use of the exchange privilege that may potentially disrupt the management of the Funds and increase transactions costs, the Fund has established a policy of limiting excessive exchange activity.
Shareholders are entitled to six (6) exchange redemptions (at least 30 days apart) from the Fund during any twelve-month period. Notwithstanding these limitations, the Fund reserves the right to reject any purchase request (including purchases by exchange) that is deemed to be disruptive to efficient portfolio management.
Telephone Transactions
In order to request an exchange or redemption by telephone, a shareholder must have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request an exchange or redemption by calling (888) 261-4073. Neither RBB, the Fund, the Distributor, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures: (1) requiring the appropriate telephone transaction privilege forms; (2) requiring the caller to provide the names of the account owners, the account's social security number and name of the Fund, all of which must match RBB's records; (3) requiring RBB's service representative to complete a telephone transaction form, listing all of the above caller identification information; (4) permitting exchanges only if the two account registrations are identical; (5) requiring that redemption proceeds be sent only by check to the account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (6) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) Business Days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Fund elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than the Distributor), financial institutions, securities dealers,
financial planners and other industry professionals, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by an attorney-in-fact under a power of attorney.
The net asset value for each class of a fund is calculated by adding the value of the proportionate interest of the class in a fund's cash, securities and other assets, deducting actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class is calculated independently of each other class. The net asset values are calculated as of the close of regular trading on the NYSE, generally 4:00 p.m. Eastern time on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of RBB'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.
With the approval of RBB's Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually, and pays them in the calendar year in which they are declared, generally in December. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
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. 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) 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, whether such gain was reflected in the price paid for the Shares, or whether such gain was attributable to bonds bearing tax-exempt interest. All other distributions, to the extent they are taxable, are taxed to shareholders as ordinary income.
RBB will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in 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 shares just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received, although the distribution is, in effect, a return of capital.
Shareholders who exchange shares representing interests in one Fund for shares representing interests in another Fund will generally recognize capital gain or loss for federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. federal income tax treatment.
The Fund offers one other class of shares, Institutional Shares, which is offered directly to institutional investors pursuant to a separate prospectus. Shares of each class represent equal pro rata interests in the Fund and accrue dividends and calculate net asset value and performance
quotations in the same manner. The Fund will quote performance of Institutional Shares separately from Investor Shares. Because of different expenses paid by the Investor Shares, the total return on such shares can be expected, at any time, to be different than the total return on Institutional Shares. Information concerning Institutional Shares may be obtained by calling the Fund at (800) 311-9783 or 9829.
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ______ billion shares are currently classified into ___ different classes of Common Stock. See "Description of Shares" in the Statement of Additional Information.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BOSTON PARTNERS MID CAP VALUE FUND AND DESCRIBE
ONLY THE INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE BOSTON PARTNERS MID CAP VALUE 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, even where a share has a different class designation than another share representing an interest in that portfolio. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB 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, RBB will assist in shareholder 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. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when RBB's Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC Inc., the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (888) 261-4073.
Share Certificates
In the interest of economy and convenience, physical certificates representing shares in the Fund are not normally issued.
Historical Performance Information
For the period from commencement of operations (June 2, 1997) through August 31, 1998, the total return (not annualized) for the Investor Class of Shares of the Fund was as follows:
Unannualized investment returns for the period ended August 31, 1998
Since Inception
The total return assumes the reinvestment of all dividends and capital gains and reflects investment advisory fee waivers and expense reimbursements in effect. Without these waivers and expense reimbursements, the Fund's performance would have been lower. Of course, past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that Shares, when redeemed, may be worth more or less than the original cost. For more information on performance, see "Performance Information" in the Statement of Additional Information.
The table below presents the Composite performance history of certain of the Adviser's managed accounts on an annualized basis for the period ended August 31, 1998. The Composite is comprised of the Adviser's institutional accounts and other privately managed accounts with investment objectives, policies and strategies substantially similar to those of the Fund, although the accounts have longer operating histories than the Fund which commenced operations on June 2, 1997. The Composite performance information includes the reinvestment of dividends received in the underlying securities and reflects investment advisory fees. The privately managed accounts in the Composite are only available to the Adviser's institutional advisory clients. The past performance of the funds and accounts that comprise the Composite is
not indicative of or a substitute for the future performance of the Fund. These accounts have lower investment advisory fees than the Fund and the Composite performance figures would have been lower if subject to the higher fees and expenses incurred by the Fund. These private accounts are not subject to the same investment limitations, diversification requirements and other restrictions which are imposed upon mutual funds under the 1940 Act and the Internal Revenue Code, which, if imposed, may have adversely affected the performance results of the Composite. Listed below the performance history for the Composite is the performance history for a comparative index comprised of securities similar to those in which accounts contained in the Composite are invested.
Annualized investment returns for the period ended August 31, 1998
Since Since
One Year Inception*
-------- ----------
Composite Performance.............. % %*
Russell 2500 Index................. % %
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* The Adviser commenced managing these accounts on May 1, 1995.
The Russell 2500 Index represents the largest 3000 companies domiciled in the United States minus the largest 500 companies as determined by the market value of such companies.
Future 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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Russell 2500 Index. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as Business Week, Fortune, Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'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 RBB OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
Page
----
FINANCIAL HIGHLIGHTS................................ 2
INTRODUCTION........................................ 4
INVESTMENT OBJECTIVES AND POLICIES.................. 4
INVESTMENT LIMITATIONS.............................. 5
RISK FACTORS........................................ 6
MANAGEMENT.......................................... 7
DISTRIBUTION OF SHARES.............................. 9
HOW TO PURCHASE SHARES............................. 11
HOW TO REDEEM AND EXCHANGE SHARES.................. 12
NET ASSET VALUE.................................... 16
DIVIDENDS AND DISTRIBUTIONS........................ 16
TAXES.............................................. 16
MULTI-CLASS STRUCTURE.............................. 17
DESCRIPTION OF SHARES.............................. 18
OTHER INFORMATION.................................. 18
Investment Adviser
Boston Partners Asset Management, L.P.
Boston, Massachusetts
Custodian
PNC Bank, N.A.
Philadelphia, Pennsylvania
Transfer Agent and Administrator
PFPC Inc.
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
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Independent Accountants
PROSPECTUS
____________, 1998
BOSTON PARTNERS
MID CAP VALUE FUND
(Investor Shares)
Bp
Boston Partners Asset Management, L.P.
Boston Partners Mid Cap Value Fund bp
(Investor Class) BOSTON PARTNERS ASSET MANAGEMENT, L.P.
ACCOUNT APPLICATION
Please Note: Do not use this form to open a retirement plan account. For an IRA
application or help with this Application, please call 1-888-261-4073
(Please check the appropriate box(es) below.)
1. / / Individual / / Joint Tenant / / Other
Account _____________________________________________________
Registration: Name SOCIAL SECURITY NUMBER OR TAX ID# OF PRIMARY OWNER
For joint accounts, the account registrants will be joint tenants with right of survivorship and not tenants in common unless tenants in common or community property registrations are requested.
GIFT TO MINOR: / / Uniform Gifts/Transfer to Minor's Act
TAXPAYER IDENTIFICATION NUMBER
2. ________________________________________________________________
Mailing STREET OR P.O. BOX AND/OR APARTMENT NUMBER
Address:
________________________________________________________________
CITY STATE ZIP CODE
________________________________________________________________
DAY PHONE NUMBER EVENING PHONE NUMBER
3. Minimum initial investment Amount of investment $___________
Investment of $100,000
Information:
Make the check payable to Boston Partners Mid Cap Value Fund.
Shareholders may not purchase shares of this Fund with a check
issued by a third party and endorsed over to the Fund.
DISTRIBUTION Note: Dividends and capital gains may be reinvested or paid by
OPTIONS: check. If not options are selected below, both dividends and
capital gains will be reinvested in additional Fund shares.
Dividends / / Pay by check / / Reinvest / / Capital Gains / /
Pay by check / / Reinvest / /
|
4. To use this option, you must initial the appropriate line below.
Telephone I authorize the Transfer Agent to accept instructions from any
Redemption: persons to redeem or exchange shares in my account(s) by
telephone in accordance with the procedures and conditions set
forth in the Prospectus.
______________________ _________________ Redeem shares, and
individual initial joint initial send the proceeds to
the address of record.
______________________ _________________ Exchange shares for
individual initial joint initial shares of The Boston
Partners Large Cap
Value Fund, Market
Neutral Fund or Long-
Short Equity Fund.
5.
Automatic The Account Investment Plan which is available to shareholders of
Investment the Fund, makes possible regularly scheduled purchases of Fund
Plan: shares to allow dollar-cost averaging. The Fund's Transfer Agent
can arrange for an amount of money selected by you to be deducted
from your checking account and used to purchase shares of the
Fund.
Please debit $________ from my checking account (named below) on
or about the 20th of the month. Please attach an unsigned, voided
check.
/ / Monthly / / Every Alternate Month / / Quarterly / / Other
BANK OF _________________________________________________________________
RECORD: BANK NAME STREET ADDRESS OR P.O. BOX
_________________________________________________________________
CITY STATE ZIP CODE
_________________________________________________________________
BANK ABA NUMBER BANK ACCOUNT NUMBER
6.
Signatures The undersigned warrants that I (we) have fully authority and, if
a natural person, I (we) am (are) of legal age to purchase shares
pursuant to this Account Application, and I (we) have received a
current prospectus for the Fund in which I (we) am (are)
investing. Under the Interest and Dividend Tax Compliance Act of
1983, the Fund is required to have the following certification:
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to be issued
to), and (2) I am not subject to backup withholding because (a) I
am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service that I am subject to 31%
backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding.
Note: You must cross out item (2) above if you have been notified
by the IRS that you are currently subject to backup withholding
because you have failed to report all interest and dividends on
your tax return. The Internal Revenue Service does not require
your consent to any provision of this document other than the
certification required to audit backup withholding.
_________________________________________________________________
SIGNATURE OF APPLICANT DATE
_________________________________________________________________
PRINT NAME TITLE (IF APPLICABLE)
_________________________________________________________________
SIGNATURE OF JOINT OWNER DATE
_________________________________________________________________
PRINT NAME TITLE (IF APPLICABLE)
|
(If you are signing for a corporation, you must indicate corporate office or title. If you wish additional signatories on the account, please include a corporate resolution. If signing as a fiduciary, you must indicate capacity.)
For information on additional options, such as IRA Applications, rollover requests for qualified retirement plans, or for wire instructions, please call us at 1-888-261-4073.
Mail completed Account Application and check to:
The Boston Partners Mid Cap Value Fund c/o PFPC Inc. P.O. Box 8852 Wilmington, DE 19899-8852
BOSTON PARTNERS BOND FUND
(Institutional Class)
of
The RBB Fund, Inc.
Boston Partners Bond Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares of the Institutional Class ("Shares") offered by this Prospectus represent interests in the Fund. The investment objectives of the Fund are to maximize total return by investing principally in investment grade fixed income securities, and secondarily to seek current income.
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 and is incorporated by reference in this
Prospectus. It may be obtained free of charge from the Fund by calling
(800) 311-9783 or 9829. The Prospectus and the Statement of Additional
Information are available for reference, along with other related material, on
the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS _________, 1998
The following table illustrates annual operating expenses incurred by Institutional shares of the Fund (after fee waivers and expense reimbursements) for the fiscal period ended August 31, 1998 as a percentage of average daily net assets. An example based on the summary is also shown.
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees (after waivers)*.................................... %
12b-1 Fees.......................................................... 0.00%
Other Expenses...................................................... %
Total Fund Operating Expenses (after waivers)*...................... %
====
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* In the absence of fee waivers, Management Fees would be .40% and Total Fund Operating Expenses would be _____%.
Example
An investor would pay the following expenses on a $1,000 investment in the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each time period:
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
Boston Partners Bond Fund..........................$ $ $ $
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The 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 the various costs and expenses, see "Management" below.) The Fee Table reflects a voluntary waiver of "Management Fees" and administrative services fees for the Fund, which are expected to be in effect during the current fiscal period. However, the Adviser and Administrative Services Agent are under no obligation with respect to such waivers and there can be no assurance that any future waivers of Management fees or administrative services fees will not vary from the figures reflected in the Fee Table.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The "Financial Highlights" presented below set forth certain investment results for shares of the Institutional Class of the Fund for the period indicated. Shares of the Institutional Class were first issued on December 30, 1997. The financial data included in this table should be read in conjunction with the financial statements and notes thereto and the unqualified report of ________________________-, RBB's independent accountant, which are incorporated by reference into the Statement of Additional Information. Further information about the performance of the Institutional Class of the Fund is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on page 1 of the prospectus.
BOSTON PARTNERS BOND FUND
(For an Institutional Share outstanding throughout each period)
RBB is an open-end management investment company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interests in the Boston Partners Bond Fund. RBB was incorporated in Maryland on February 29, 1988.
The investment objectives of the Fund are to maximize total return by investing principally in investment grade fixed income securities, and secondarily to seek current income.
The Fund will invest during normal market conditions at least 75% of its total assets in
bonds, including corporate debt obligations and mortgage-backed and asset-backed securities (collectively, "Debt Securities") rated investment-grade or better at the time of purchase by Standard & Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's") or which are similarly rated by another nationally recognized statistical rating organization ("Rating Organization") (including Fitch IBCA, Duff & Phelps, and Thomson BankWatch), or are unrated but deemed by Boston Partners Asset Management L.P. (the "Adviser") to be comparable in quality to instruments so rated. The Fund may invest up to 25% of its total assets in Debt Securities rated "BB" and "B" by Moody's or "Ba" and "B" by S&P or which are similarly rated by another Rating Organization or are unrated but are deemed by the Adviser to be comparable in quality to instruments that are so rated.
Investment-grade Debt Securities are those rated at the time of purchase "AAA," "AA," "A" or "BBB" by S&P, "Aaa," "Aa," "A" or "Baa" by Moody's or which are similarly rated by another Rating Organization or are unrated but deemed by the Adviser to be comparable in quality to instruments that are so rated. Debt Securities rated "BBB" by S&P, "Baa" by Moody's or the equivalent rating of another Rating Organization, while still deemed investment-grade, are considered to have speculative characteristics and are more sensitive to economic change than higher rated bonds. Debt Securities rated below the four highest ratings of S&P or Moody's are often referred to as "junk bonds." Such Debt Securities are rated below investment-grade and carry a higher degree of risk and are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. See "Risk Factors -- Lower Rated Securities."
The Adviser will select certain mortgage-backed and asset-backed securities which it believes have superior risk/return characteristics versus other fixed income instruments. Mortgage-backed securities represent pools of mortgage loans assembled for sale to investors by various governmental agencies as well as by private issuers. Asset-backed securities represent pools of other assets (such as automobile installment purchase obligations and credit card receivables) similarly assembled for sale by private issuers. See "Risk Factors -- Mortgage-Backed and Asset-Backed Securities" in this prospectus and "Investment Objective and Policies" in the Statement of Additional Information.
The Fund may also invest up to 15% of its total assets in each of the following: collateralized mortgage obligations ("CMOs"), Yankee Bonds (dollar-denominated debt securities of foreign issuers), non-dollar denominated bonds of foreign or domestic issuers, securities that can be purchased and sold privately to institutional investors pursuant to Rule 144A, and convertible Debt Securities of U.S. and foreign issuers (including convertible preferred stock and notes). See "Risk Factors" in this Prospectus and "Investment Objective and Policies" in the Statement of Additional Information.
The Fund may invest in debt securities issued by the U.S. Government or government
agencies, repurchase agreements and reverse repurchase agreements, foreign currency exchange transactions, dollar rolls, futures, option contracts (including options on futures) and stripped securities. The Fund may make when-issued purchases and forward commitments. See "Risk Factors" in this Prospectus and "Investment Objective and Policies" in the Statement of Additional Information.
The Fund may invest in registered investment companies and investment funds in foreign countries subject to the provisions of the Investment Company Act of 1940, as amended (the "1940 Act"), and as discussed in "Investment Objective and Policies" in the Statement of Additional Information. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
Although the Fund has no restriction as to the maximum or minimum duration of any individual security held by it, during normal market conditions the Fund's average effective duration will generally be within 5% of the duration of the Lehman Brothers Aggregate Bond Index. "Duration" is a term used by investment managers to express the average time to receipt of expected cash flows (discounted to their present value) on a particular fixed income instrument or a portfolio of instruments. Duration takes into account the pattern of a security's cash flow over time, including how cash flow is affected by prepayments and changes in interest rates. For example, the duration of a five-year zero coupon bond that pays no interest or principal until the maturity of the bond is five years. This is because a zero coupon bond produces no cash flow until the maturity date. On the other hand, a coupon bond that pays interest semi-annually and matures in five years will have a duration of less than five years, which reflects the semi-annual cash flows resulting from coupon payments. Duration also generally defines the effect of interest rate changes on bond prices. Generally, if interest rates increase by one percent, the value of a security having an effective duration of five years would decrease in value by five percent.
The Fund's investment objectives and policies described above may be changed by RBB's Board of Directors without the approval of the Fund's shareholders.
The Fund may not change the following investment limitations without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objective and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase, more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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.
If a percentage restriction under one of the Funds' investment policies or restrictions or the use of assets is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
Portfolio Turnover
The Fund retains the right to sell securities irrespective of how long they have been held. The Adviser estimates that the annual turnover in the Fund will be approximately 100%. High portfolio turnover (100% or more) will generally result in higher transaction costs to a portfolio and may result in the realization of short-term capital gains that are taxable to shareholders as ordinary income.
Interest Rate Risk
Generally, the market value of fixed income securities is subject to interest rate fluctuation and can be expected to vary inversely to changes in the prevailing interest rates. Thus, the value of portfolio investments held by the Fund is likely to decline if prevailing interest rates rise, and vice versa.
Lower Rated Securities
Investors should carefully consider the relative risks of investing in the higher yielding (and, therefore, higher risk) debt securities rated below investment-grade by S&P or Moody's, or which are similarly rated by another Rating Organization or are unrated but deemed by the Adviser to be comparable to instruments so rated.
The Fund's investments in obligations rated below the four highest ratings of S&P and Moody's have different risks than investments in securities that are rated "investment-grade." Risk of loss upon default by the borrower is significantly greater because lower-rated securities are generally unsecured and are often subordinated to other creditors of the issuer, and because the issuers frequently have high levels of indebtedness and are more sensitive to adverse economic conditions, such as recessions, individual corporate developments and increasing interest rates than are investment-grade issuers. As a result, the market price of such securities, and the net asset value of the Fund's Shares, may be particularly volatile.
Additional risks associated with lower-rated fixed income securities are
(a) the relatively low trading market liquidity for the securities and (b) the
creditworthiness of the issuers of such securities. During an economic downturn
or substantial period of rising interest rates, highly-leveraged issuers may
experience financial stress that would adversely affect their ability to service
their principal and interest payment obligations, to meet projected business
goals and to obtain additional financing. An economic downturn could also
disrupt the market for lower-rated bonds generally and adversely affect the
value of outstanding bonds and the ability of the issuers to repay principal and
interest. If the issuer of a lower-rated security held by the Fund defaulted,
the Fund could incur additional expenses to seek recovery. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may also
decrease the values and liquidity of lower-rated securities held by the Fund,
especially in a thinly traded market. Finally, the Fund's trading in fixed
income securities entails risks that capital losses rather than gains will
result. As a result, investment in the Fund should not be considered a complete
investment program.
The Adviser will continually evaluate lower-rated securities and the ability of their issuers to pay interest and principal. The Fund's ability to achieve its investment objectives may be more dependent on the Adviser's credit analysis than might be the case for a fund that invested in higher rated securities. See the "Appendix" in the Statement of Additional Information for a general description of securities ratings.
Mortgage-Backed and Asset-Backed Securities
Mortgage-backed securities, like other fixed income instruments, may be subject to risks including price fluctuations due to interest rate changes. The returns on mortgage-backed securities may also be negatively affected by changes in principal pre-payment rates due to interest rate volatility.
Mortgage-related securities acquired by the Fund may include collateralized mortgage obligations ("CMOs"), a type of derivative, issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, Government National Mortgage Association or other U.S. Government agencies or instrumentalities, as well as by private issuers. CMOs may involve additional risks other than those found in other types of mortgage-related obligations in that they may exhibit more price volatility and interest rate risk than such obligations. During periods of rising interest rates, CMOs may lose their liquidity as CMO market makers may choose not to repurchase, or may offer prices based on current market conditions, which are unacceptable to a fund based on the fund's analysis of the market value of the security. See "Investment Objectives and Policies" in the Statement of Additional Information.
Asset-backed securities are also subject to declines in market value during
periods of rising interest rates. Due to the possibility of prepayment of the
underlying obligations, asset-backed securities have less potential for capital
appreciation than other debt securities of comparable maturities during periods
of declining interest rates. As a result, asset-backed securities may be less
effective than other fixed income securities as a means of locking in attractive
interest rates for the long term.
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 the securities at an agreed-upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940 (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Fund will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement and will monitor the account to ensure that such value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase. The Fund may also enter into "dollar rolls," in which it sells fixed income securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, 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.
Foreign Securities Risk
The Fund may invest in foreign securities, as described above. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operating in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. 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 assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. See "Investment Objectives and Policies -- Foreign Securities" in the Statement of Additional Information.
Foreign Currency Exchange Transactions
Because the Fund may buy and sell securities denominated in currencies other than the U.S. dollar, and may receive interest and sale proceeds in currencies other than the U.S. dollar, the Fund from time to time may enter into foreign currency exchange transactions to convert the U.S. dollar to foreign currencies, to convert foreign currencies to the U.S. dollar and to convert foreign currencies to other foreign currencies. Forward foreign currency exchange contracts are agreements to exchange one currency for another -- for example, to exchange a certain amount of U.S. dollars for a certain amount of Japanese yen -- at a future date and at a specified price. Typically, the other party to a currency exchange contract will be a commercial bank or other financial institution. A fund either enters into these transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or uses forward contracts to purchase or sell foreign currencies.
Forward foreign currency exchange contracts also allow the Fund to hedge the currency risk of portfolio securities denominated in a foreign currency. This technique permits the assessment of the merits of a security to be considered separately from the currency risk. By separating the asset and the currency decision, it is possible to focus on the opportunities presented by the security apart from the currency risk. Although forward foreign currency exchange contracts are of short duration, generally between one and twelve months, the forward foreign currency exchange contracts are rolled over in a manner consistent with a more long-term currency decision. There is a risk of loss to the Fund if the other party does not complete the transaction.
European Currency Unification
Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Fund may invest and may result in the Fund facing additional risks in pursuing its investment objective. These risks, which include, but are not limited to, uncertainty as to the proper tax treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of the Fund's net asset value per share.
When-Issued Purchases and Forward Commitments
The Fund may purchase securities on a when-issued basis or enter into forward commitment transactions. When the Fund agrees to purchase securities on a when-issued basis or enters into a forward commitment to purchase securities, the Custodian will set aside cash, U.S. Government securities or other liquid assets equal to the amount of the purchase or the commitment in a separate account. As a result, the Fund's liquidity and ability to manage its portfolio might be affected in the event its when-issued purchases or forward commitments ever exceeded 25% of the value of its assets. In the case of a forward commitment to sell portfolio securities, the Custodian will hold the portfolio securities in a segregated account while the commitment is outstanding. When the Fund engages in when-issued and forward commitment transactions, it relies on the other party to consummate the trade. Failure of such party to do so may result in the Fund incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Year 2000
The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on the Adviser's provision of investment advisory services, including the handling of securities trades pricing. Both the Adviser and PFPC have advised RBB that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that the Adviser or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
General
The Fund's use of certain investment techniques, including derivatives, options and futures transactions, will subject the Fund to greater risk than Funds that do not employ such techniques.
Investment methods described in this Prospectus are among those which the Fund has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
Board of Directors
The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors.
Investment Adviser
Boston Partners Asset Management, L.P., located at 28 State Street, 21st Floor, Boston, Massachusetts 02109, serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other institutional accounts that had aggregate total assets under management as of June 30, 1998 in excess of $_____ billion. The adviser is organized as a Delaware limited partnership whose sole general partner is Boston Partners, Inc., a Delaware corporation.
Subject to the supervision and direction of RBB's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objectives and policies, makes investment decisions for the Fund, places orders to purchase and sell securities and employs professional portfolio managers and securities analysts who provide research services to the Fund. For its services to the Fund, the Adviser is paid an advisory fee computed at an annual rate of 0.40% of the Fund's average daily net assets, which is calculated daily and paid monthly. The Adviser has notified RBB, however, that it intends to waive advisory fees in excess of ___% during the Fund's current fiscal year.
Portfolio Management
The day-to-day portfolio management of the Fund is the responsibility of
William R. Leach who is a senior portfolio manager of the Adviser and Chairman
of the Fixed Income Strategy Committee. Prior to joining the Adviser in April
1995, Mr. Leach was employed by The Boston Company Asset Management, Inc. ("The
Boston Company") from 1988 through April 1995 where he was a senior portfolio
manager and Director of the Fixed Income Strategy Committee. Mr. Leach has over
16 years of investment experience and is a Chartered Financial Analyst ("CFA").
Mr. Leach will be assisted by Glenn S. Davis, Joseph F. Feeney, Jr. and Michael
A. Mullaney. Mr. Davis is a Fixed Income Portfolio Manager with the Adviser and
is also a CFA. Prior to joining the Adviser in April 1995, he was Vice President
and Portfolio Manager at The Boston Company, specializing in short and
intermediate term corporate bonds. Prior to that position, he was responsible
for the Short-term Fixed Income Group at State Street Global Advisors. He has a
total of 17 years of investment experience. Mr. Feeney is a Fixed Income
Portfolio Manager with the Adviser and also a CFA. Prior to joining the Adviser
in April 1995, he was Assistant Vice President and Mortgage-backed Securities
Portfolio Manager for Putnam Investments. Mr. Mullaney is a Fixed Income
Portfolio Manager who joined the Adviser in June 1997. From 1984 to 1997, he was
employed at Putnam Investments, most recently as Managing Director and Senior
Investment Strategist, specializing in portfolio strategy and management. His
prior experience included a position as a senior Consultant from 1981 to 1983
with Chase Econometrics/Interactive Data Corporation, where he focused on
quantitative methodologies in fixed income and equity management. He has over 16
years of investment experience.
Administrator
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC's principal offices are located at 400 Bellevue Parkway, Wilmington, Delaware 19809. For its services, PFPC receives a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis.
Transfer Agent, Dividend Disbursing Agent and Custodian
PNC Bank, National Association ("PNC Bank") serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent.
Administrative Services Agent
Provident Distributors, Inc. ("PDI") provides certain administrative services to the Fund's Institutional Shares not otherwise provided by PFPC. PDI's principal business address is Four Falls Corporate Center, West Conshohocken, Pennsylvania 19428. PDI furnishes certain internal quasi-legal, executive and administrative services to the Fund, acts as a liaison between the Fund and its various service providers and coordinates and assists in the preparation of reports prepared on behalf of the Fund. For its services, PDI is entitled to a monthly fee calculated at the annual rate of .15% of the respective average daily net assets of the Fund's Institutional Class. PDI is currently waiving fees in excess of .03% of the average daily net assets of the Fund's Institutional Class.
Distributor
PDI acts as distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares.
Expenses
The expenses of the Fund are deducted from its total income before dividends are paid. These expenses include, but are not limited to: fees paid to the Adviser and PFPC; administrative services fees; fees and expenses of officers and directors who are not affiliated with any of RBB's investment advisers, sub-advisers or the Distributor; taxes; interest; legal fees; custodian fees; auditing fees; brokerage fees and commissions; certain of the fees and expenses of registering and qualifying the Fund and the Shares for distribution under federal and state securities laws; expenses of preparing prospectuses and statements of additional information and of printing and distributing them annually to existing shareholders that are not attributable to a particular class of shares of RBB; the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of RBB; fidelity bond and directors and officers' liability insurance premiums; the expense of using independent pricing services; and other expenses that are not expressly assumed by the Adviser under its investment advisory agreement with respect to the Fund. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios. Distribution expenses, transfer agency expenses, expenses of preparation, printing and distributing prospectuses, statements of additional information, proxy statements and reports to shareholders and registration fees, identified as belonging to a particular class, are allocated to such class.
The Adviser may assume expenses of the Fund from time to time. To the extent any
service providers assume expenses of the Fund, such assumption of expenses will have the effect of lowering the Fund's overall expense ratio and increasing its yield to investors.
General
Shares representing interests in the Fund are offered continuously for sale by the Distributor and may be purchased without imposition of a sales charge. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application to the Fund's transfer agent, PFPC. Purchases of Shares may be effected by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Boston Partners Bond Fund" c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. The name of the Fund, Boston Partners Bond Fund, must also appear on the check or Federal Reserve Draft. Shareholders may not purchase shares of the Boston Partners Bond Fund with a check issued by a third party and endorsed over to the Fund. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $100,000 and subsequent investments must be at least $5,000. For purposes of meeting the minimum initial purchase, clients which are part of endowments, foundations or other related groups may be aggregated. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order.
Shares may be purchased by principals and employees of the Adviser and by their spouses and children either directly or through any trust that has the principal, employee, spouse or child as the primary beneficiaries, their individual retirement accounts, or any pension and profit-sharing plan of the Adviser without being subject to the minimum investment limitations.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day and on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased initially or acquired through the exercise of an exchange privilege is based on the net asset value next computed after a purchase order is received in good order by the Fund or its agents. Orders received by the Fund or its agents
after the close of regular trading on the New York Stock Exchange, Inc. (currently 4 p.m., Eastern time) are priced at the net asset value next determined on the following business day. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
An investor may also purchase Shares by having his bank or his broker wire Federal Funds to PFPC. An investor's bank or broker may impose a charge for this service. The Fund does not currently impose a service charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 261-4073, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-1108-2507
FROM: (name of investor)
ACCOUNT NUMBER: (Investor's account number with the
Fund)
FOR PURCHASE OF: Boston Partners Bond Fund
AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process purchases until it receives a fully completed and signed application.
For subsequent investments, an investor should follow steps A and B above.
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account on a regular basis. Investors desiring to participate in the automatic investing program should call the Fund's transfer agent, PFPC, at (888) 261-4073 to obtain the appropriate forms.
Redemption By Mail
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Boston Partners Bond Fund c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. There is no charge for a redemption.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Involuntary Redemption
RBB reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents 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 law. If the Shares to be redeemed have been recently purchased by check, PFPC may delay mailing a redemption check for up to 15 days, pending a determination that the check has cleared. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that it is obligated to redeem its Shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
Exchange Privilege
The exchange privilege is available to shareholders residing in any state in which the Shares being acquired may be legally sold. A shareholder may exchange Shares of the Fund for Institutional Shares of any other Boston Partners Fund of RBB subject to restrictions described under "Exchange Privilege Limitations" below. Such exchange will be effected at the net asset value of the exchanged Fund and the net asset value of the Fund being acquired next determined after receipt of a request for an exchange by the Fund or its agents. An exchange of Shares will be treated as a sale for federal income tax purposes. See "Taxes." A shareholder wishing to make an exchange may do so by sending a written request to PFPC.
If the exchanging shareholder does not currently own Institutional Shares of the Boston Partners Fund into which he would like to exchange, a new account will be established with the same registration, dividend and capital gain options as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted. The exchange privilege may be modified or terminated at any time, or from time to time, by RBB, upon 60 days' written notice to shareholders.
If an exchange is to a new account in the Fund, the dollar value of Shares acquired must equal or exceed that Fund's minimum for a new account; if to an existing account,
the dollar value must equal or exceed that Fund's minimum for subsequent investments. If any amount remains in the Fund from which the exchange is being made, such amount must not drop below the minimum account value required by the Fund.
Exchange Privilege Limitations
The Fund's exchange privilege is not intended to afford shareholders a way to speculate on short-term movements in the market. Accordingly, in order to prevent excessive use of the exchange privilege that may potentially disrupt the management of the Funds and increase transactions costs, the Fund has established a policy of limiting excessive exchange activity.
Shareholders are entitled to six (6) exchange redemptions (at least 30 days apart) from the Fund during any twelve-month period. Notwithstanding these limitations, the Fund reserves the right to reject any purchase request (including purchases by exchange) that is deemed to be disruptive to efficient portfolio management.
Telephone Transactions
In order to request an exchange or redemption by telephone, a shareholder must have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Exchange Authorization Form must be filed with PFPC. These forms are available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the exchange or redemption by calling (888) 261-4073. Neither RBB, the Fund, the Distributor, the Administrator nor any Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures: (1) requiring the appropriate telephone transaction privilege forms; (2) requiring the caller to provide the names of the account owners, the account social security number and name of the Fund, all of which must match RBB's records; (3) requiring RBB's service representative to complete a telephone transaction form, listing all of the above caller identification information; (4) permitting exchanges only if the two account registrations are identical; (5) requiring that redemption proceeds be sent only by check to the account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (6) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) business days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Fund elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than the Distributor), financial
institutions, securities dealers, financial planners and other industry professionals, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by an attorney-in-fact under a power of attorney.
The net asset value for each class of the Fund is 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 each class and dividing by the total number of outstanding shares of the class. The net asset value is calculated as of the close of regular trading on the NYSE on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of RBB'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.
With the approval of the Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income monthly. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
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. 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) 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, whether such gain was reflected in the price paid for the shares, or whether such gain was attributable to bonds bearing tax-exempt interest. All other distributions, to the extent they are taxable, are taxed to shareholders as ordinary income.
RBB will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in 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 shares just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received, although the distribution is, in effect, a return of capital.
Shareholders who exchange shares representing interests in one Fund for shares representing interests in another Fund will generally recognize capital gain or loss for federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. federal income tax
treatment.
The Fund offers one other class of shares, Investor Shares, which are offered directly to individual investors pursuant to a separate prospectus. Shares of each class represent equal pro rata interests in the Fund and accrue dividends and calculate net asset value and performance quotations in the same manner. The Fund will quote performance of the Investor Shares separately from Institutional Shares. Because of different fees paid by the Institutional Shares, the total return on such shares can be expected, at any time, to be different than the total return on Investor Shares. Information concerning the other class may be obtained by calling the Fund at (800) 311-9783 or 9829.
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ____ billion shares are currently classified into ___ different classes of Common Stock. See "Description of Shares" in the "Statement of Additional Information."
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BOSTON PARTNERS BOND FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO BOSTON PARTNERS BOND 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, even where a share has a different class designation than another share representing an interest in the Fund. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB 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, RBB will assist in shareholder communications 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. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or
when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of _________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to the Fund's transfer agent, PFPC Inc., at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (888) 261-4073.
Share Certificates
In the interest of economy and convenience, physical certificates representing Shares in the Fund are not normally issued.
Historical Performance Information
For the period from commencement of operations (December 30, 1997) through August 31, 1998, the total return since inception (not annualized) for the Institutional Class of Shares of the Fund was as follows:
Unannualized investment returns for the period ended August 31, 1998
Since Inception Boston Partners Bond Fund..............
(Institutional Shares)
The total return assumes reinvestment of all dividends and capital gains and
reflects expense reimbursements and investment advisory fee waivers in effect. Without these expense reimbursements waivers, the Fund's performance would have been lower. Of course, past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that Shares, when redeemed, may be worth more or less than the original cost. For more information on performance, see "Performance Information" in the Statement of Additional Information.
The table below presents the Composite performance history of certain of the Adviser's managed accounts on an annualized basis since inception for the year ended September 30, 1998. The Composite is comprised of all of the Adviser's institutional accounts and other privately managed accounts with investment objectives, policies and strategies substantially similar to those of the Fund, although the accounts have operating histories, whereas the Fund had not commenced operations until December 30, 1997. The Composite performance information includes the reinvestment of interest received by the underlying securities, realized and unrealized gains and losses, and reflects the payment of investment advisory fees. The Composite performance does not reflect custody fees or administrative fees that may be charged by banks, fiduciaries or other third parties in connection with these institutional and privately managed accounts. The privately managed accounts in the Composite are only available to the Adviser's institutional advisory clients. The past performance of the accounts which comprise the Composite is not indicative of the future performance of the Fund. These accounts have lower investment advisory fees than the Fund and the Composite performance figures would have been lower if subject to the higher fees and expenses to be incurred by the Fund. These private accounts are also not subject to the same investment limitations, diversification requirements and other restrictions which are imposed upon mutual funds under the 1940 Act and the Internal Revenue Code, which, if imposed, may have adversely affected the performance results of the Composite. Listed below the performance history for the Composite is a comparative index comprised of securities similar to those in which accounts contained in the Composite are invested.
Average annualized investment returns for the period ended September 30, 1998
One Since
Year Inception*
---- ----------
Composite Performance........................... % %
Lehman Brothers Aggregate Bond Index ........... % %
|
The Lehman Brothers Aggregate Bond Index is a broad market-weighted index, which encompasses three major classes of investment-grade, fixed-income securities with maturities greater than one year, including U.S. Treasury securities, corporate bonds and mortgage-backed securities.
* The Adviser commenced managing these accounts on June 1, 1995
Future 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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Lehman Brothers Aggregate Bond Index. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as Business Week, Fortune, Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
[THIS PAGE INTENTIONALLY LEFT BLANK]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'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 RBB OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
Page
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INTRODUCTION...................................... 3
INVESTMENT OBJECTIVES AND POLICIES................ 3
INVESTMENT LIMITATIONS............................ 5
RISK FACTORS...................................... 6
MANAGEMENT........................................ 9
DISTRIBUTION OF SHARES............................ 12
HOW TO PURCHASE SHARES............................ 12
HOW TO REDEEM AND EXCHANGE SHARES................. 14
NET ASSET VALUE................................... 17
DIVIDENDS AND DISTRIBUTIONS....................... 17
TAXES............................................. 17
MULTI-CLASS STRUCTURE............................. 19
DESCRIPTION OF SHARES............................. 19
OTHER INFORMATION................................. 20
Investment Adviser
Boston Partners Asset Management, L.P.
Boston, Massachusetts
Custodian
PNC Bank, N.A.
Philadelphia, Pennsylvania
Transfer Agent
PFPC Inc.
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
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Independent Accountants
PROSPECTUS
____________, 1998
BOSTON PARTNERS
BOND FUND
(Institutional Shares)
bp
Boston Partners Bond Fund bp (Institutional Class) BOSTON PARTNERS ASSET MANAGEMENT, L.P.
ACCOUNT APPLICATION
Please Note: Do not use this form to open a retirement plan account. For an IRA
application or help with this Application, please call 1-888-261-4073
1 (Please check the appropriate box(es) below.) Account
Registration: 1 Individual 2 Joint Tenant 3 Other
_________________________________________________________________
NAME SOCIAL SECURITY NUMBER OR TAX ID # OF PRIMARY
_________________________________________________________________
NAME OF JOINT OWNER SOCIAL SECURITY NUMBER OR TAX ID #
JOINT OWNER
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For joint accounts, the account registrants will be joint tenants with right of survivorship and not tenants in common unless tenants in common or community property registrations are requested.
4 Uniform Gifts/Transfer to Minor's Act
GIFT TO
MINOR: _________________________________________
NAME OF ADULT CUSTODIAN (ONLY ONE)
CORPORATION,
PARTNERSHIP,
TRUST OR
OTHER ENTITY: _________________________________________________________________
NAME OF CORPORATION, PARTNERSHIP, NAME(S) OF TRUSTEE(S)
OR OTHER
2 _________________________________________________________________
Mailing STREET OR P.O. BOX AND/OR APARTMENT NUMBER
Address:
_________________________________________________________________
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CITY STATE ZIP CODE
3 Minimum initial investment Amount of investment $__________
Investment of $100,000.
Information:
Make the check payable to Boston Partners Bond Fund.
Shareholders may not purchase shares of this Fund with a check
issued by a third party and endorsed over to the Fund.
NOTE: Dividends and capital gains may be reinvested or paid by
check. If no options are selected below, both dividends and
capital gains will be reinvested in additional Fund shares.
DISTRIBUTION Interest 5 Pay by check 6 Reinvest 7
OPTIONS: Capital Gains 8 Pay by check 9 Reinvest 10
4
Telephone To use this option, you must initial the appropriate line below.
Exchange and
Redemption: I authorize the Transfer Agent to accept instructions from any
persons to redeem or exchange shares in my account(s) by
telephone in accordance with the procedures and conditions set
forth in the Fund's current prospectus.
______________________ _________________ Redeem shares, and
individual initial joint initial send the proceeds to
the address of record.
______________________ _________________ Exchange shares for
individual initial joint initial shares of the Boston
Partners Large Cap
Value Fund, Mid Cap
Value Fund, Micro Cap
Value Fund, Market
Neutral Fund or Long-
Short Equity Fund.
5
Automatic The Automatic Investment Plan which is available to shareholders
Investment of the Fund, makes possible regularly scheduled purchases of Fund
Plan: shares to allow dollar-cost averaging. The Fund's Transfer Agent
can arrange for an amount of money selected by you to be deducted
from your checking account and used to purchase shares of the
Fund.
Please debit $________ from my checking account (named below) on
or about the 20th of the month. Please attach an unsigned, voided
check.
11 Monthly 12 Every Alternate Month 13 Quarterly 14 Other
BANK OF _________________________________________________________________
RECORD: BANK NAME STREET ADDRESS OR P.O. BOX
_________________________________________________________________
CITY STATE ZIP CODE
_________________________________________________________________
BANK ABA NUMBER BANK ACCOUNT NUMBER
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6
Signatures: The undersigned warrants that I (we) have full authority and, if
a natural person, I (we) am (are) of legal age to purchase shares
pursuant to this Account Application, and I (we) have received a
current prospectus for the Fund in which I (we) am (are)
investing.
Under the Interest and Dividend Tax Compliance Act of 1983, the
Fund is required to have the following certification:
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to
be issued to), and
(2) I am not subject to backup withholding because (a) I am
exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service that I am
subject to 31% backup withholding as a result of a
failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to
backup withholding.
Note: You must cross out item (2) above if you have been notified
by the IRS that you are currently subject to backup withholding
because you have failed to report all interest and dividends on
your tax return. The Internal Revenue Service does not require
your consent to any provision of this document other than the
certification required to audit backup withholding.
_________________________________________________________________
SIGNATURE OF APPLICANT DATE
_________________________________________________________________
PRINT NAME TITLE (IF APPLICABLE)
_________________________________________________________________
SIGNATURE OF JOINT OWNER DATE
_________________________________________________________________
PRINT NAME TITLE (IF APPLICABLE)
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(If you are signing for a corporation, you must indicate corporate office or title. If you wish additional signatories on the account, please include a corporate resolution. If signing as a fiduciary, you must indicate capacity.)
For information on additional options, such as IRA Applications, rollover requests for qualified retirement plans, or for wire instructions, please call us at 1-888-261-4073.
Mail completed Account Application and check to:
The Boston Partners Bond Fund c/o PFPC Inc. P.O. Box 8852 Wilmington, DE 19899-8852
BOSTON PARTNERS BOND FUND
(Investor Class)
of
The RBB Fund, Inc.
Boston Partners Bond Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares of the Investor Class ("Shares") offered by this Prospectus represent interests in the Fund. The investment objectives of the Fund are to maximize total return by investing principally in investment grade fixed income securities, and secondarily to seek current income.
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 and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund by calling (800) 311-9783 or 9829. The Prospectus and the Statement of Additional Information are available for reference, along with other related material on the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS _________, 1998
The following table illustrates annual operating expenses incurred by the Investor shares of the Fund (after fee waivers and expense reimbursements) for the fiscal period ended August 31, 1998 as a percentage of average daily net assets. An example based on the summary is also shown.
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees (after waivers)*.................. ____%
12b-1 Fees........................................ 0.25%
Other Expenses.................................... ____%
Total Fund Operating Expenses (after waivers)*.... %
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* In the absence of fee waivers, Management Fees would be 0.40% and Total Fund Operating Expenses would be ____%.
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:
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
Boston Partners Bond Fund...... $ $ $ $
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The 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 the various costs and expenses, see "Management" and "Distribution of Shares" below.) The Fee Table reflects a voluntary waiver of "Management fees" for the Fund which is expected to be in effect during the current fiscal year. However, the Adviser is under no obligation with respect to such waiver and there can be no assurance that any future waivers of Management fees will not vary from the figure reflected in the Fee Table.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The "Financial Highlights" presented below set forth certain investment results for shares of the Investor Class of the Fund for the period indicated. Shares of the Investor Class were first issued on December 30, 1998. The financial data included in this table should be read in conjunction with the financial statements and notes thereto and the unqualified report of _________________________, RBB's independent accountant, which are incorporated by reference into the Statement of Additional Information. Further information about the performance of the Investor Class of the Fund is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on page 1 of the prospectus.
BOSTON PARTNERS BOND FUND
(For an Investor Share outstanding throughout each period)
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
period, except for dividends and distributions, if any, which are based
on actual shares outstanding on the dates of distributions.
*** Annualized.
**** Not annualized.
(1) Reflects waivers and reimbursements.
(2) The amount shown for a share outstanding throughout the period is not
in accord with the change in the aggregate gains and losses in
investments during the period because of the timing of sales and
repurchases of Fund shares in relation to fluctuating net asset value
during the period.
(3) Total return is calculated assuming a purchase of shares on the first
day and a sale of shares on the last day of the period reported and
will include reinvestments of dividends and distributions, if any.
Total return is not annualized.
(4) Without the waiver of advisory, 12b-1, administration and transfer
agent fees and without the reimbursement of certain operating expenses,
the ratio of expenses to average net assets annualized for the period
ended August 31, 1998 would have been _____% for the Investor Class.
(5) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period subject to such
commissions.
RBB is an open-end management investment company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interests in the Boston Partners Bond Fund. RBB was incorporated in Maryland on February 29, 1988.
The investment objectives of the Fund are to maximize total return by investing principally in investment grade fixed income securities, and secondarily to seek current income.
The Fund will invest during normal market conditions at least 75% of its total assets in bonds, including corporate debt obligations and mortgage-backed and asset-backed securities (collectively, "Debt Securities") rated investment-grade or better at the time of purchase by Standard & Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's") or which are similarly rated by another nationally recognized statistical rating organization ("Rating Organization") (including Fitch IBCA, Duff & Phelps and Thomson BankWatch), or are unrated but deemed by Boston Partners Asset Management L.P. (the "Adviser") to be comparable in quality to instruments so rated. The Fund may invest up to 25% of its total assets in Debt Securities rated "BB" and "B" by Moody's or "Ba" and "B" by S&P or which are similarly rated by another Rating Organization or are unrated but are deemed by the Adviser to be comparable in quality to instruments that are so rated.
Investment-grade Debt Securities are those rated at the time of purchase "AAA," "AA," "A" or "BBB" by S&P, "Aaa," "Aa," "A" or "Baa" by Moody's or which are similarly rated by another Rating Organization or are unrated but deemed by the Adviser to be comparable in quality to instruments that are so rated. Debt Securities rated "BBB" by S&P, "Baa" by Moody's or the equivalent rating of another Rating Organization, while still deemed investment-grade, are considered to have speculative characteristics and are more sensitive to economic change than higher rated bonds. Debt Securities rated below the four highest ratings of S&P or Moody's are often referred to as "junk bonds." Such Debt Securities are rated below investment-grade and carry a higher degree of risk and are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. See "Risk Factors -- Lower Rated Securities."
The Adviser will select certain mortgage-backed and asset-backed securities which it
believes have superior risk/return characteristics versus other fixed income instruments. Mortgage-backed securities represent pools of mortgage loans assembled for sale to investors by various governmental agencies as well as by private issuers. Asset-backed securities represent pools of other assets (such as automobile installment purchase obligations and credit card receivables) similarly assembled for sale by private issuers. See "Risk Factors -- Mortgage-Backed and Asset-Backed Securities" in this prospectus and "Investment Objectives and Policies" in the Statement of Additional Information.
The Fund may also invest up to 15% of its total assets in each of the following: collateralized mortgage obligations ("CMOs"), Yankee Bonds (dollar-denominated debt securities of foreign issuers), non-dollar denominated bonds of foreign or domestic issuers, securities that can be purchased and sold privately to institutional investors pursuant to Rule 144A, and convertible Debt Securities of U.S. and foreign issuers (including convertible preferred stock and notes). See "Risk Factors" in this Prospectus and "Investment Objectives and Policies" in the Statement of Additional Information.
The Fund may invest in debt securities issued by the U.S. Government or government agencies, repurchase agreements and reverse repurchase agreements, foreign currency exchange transactions, dollar rolls, futures, option contracts (including options on futures) and stripped securities. The Fund may make when-issued purchases and forward commitments. See "Risk Factors" in this Prospectus and "Investment Objectives and Policies" in the Statement of Additional Information.
The Fund may invest in registered investment companies and investment funds in foreign countries subject to the provisions of the Investment Company Act of 1940, as amended (the "1940 Act"), and as discussed in "Investment Objectives and Policies" in the Statement of Additional Information. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
Although the Fund has no restriction as to the maximum or minimum duration of any individual security held by it, during normal market conditions the Fund's average effective duration will generally be within 5% of the duration of the Lehman Brothers Aggregate Bond Index. "Duration" is a term used by investment managers to express the average time to receipt of expected cash flows (discounted to their present value) on a particular fixed income instrument or a portfolio of instruments. Duration takes into account the pattern of a security's cash flow over time, including how cash flow is affected by prepayments and changes in interest rates. For example, the duration of a five-year zero coupon bond that pays no interest or principal until the maturity of the bond is five years. This is because a zero coupon bond produces no cash flow until the maturity date. On the other hand, a coupon bond that pays interest semi-annually and matures in five years will have a duration of less than five years, which reflects the semi-annual cash flows resulting from coupon payments. Duration also generally defines the effect of interest rate changes on bond prices. Generally, if interest rates increase by one percent, the value of a security having an effective duration of five years would decrease in value by five percent.
The Fund's investment objectives and policies described above may be changed by RBB's Board of Directors without the approval of the Fund's shareholders.
The Fund may not change the following investment limitations without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a
vote of the shareholders is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase, more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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.
If a percentage restriction under one of the Fund's investment policies or restrictions or the use of assets is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
Portfolio Turnover
The Fund retains the right to sell securities irrespective of how long they have been held. The Adviser estimates that the annual turnover in the Fund will be approximately 100%. High portfolio turnover (100% or more) will generally result in higher transaction costs to a portfolio and may result in the realization of short-term capital gains that are taxable to shareholders as ordinary income.
Interest Rate Risk
Generally, the market value of fixed income securities is subject to interest rate fluctuation and can be expected to vary inversely to changes in the prevailing interest rates. Thus, the value of portfolio investments held by the Fund is likely to decline if prevailing interest rates rise, and vice versa.
Lower Rated Securities
Investors should carefully consider the relative risks of investing in the higher yielding (and, therefore, higher risk) debt securities rated below investment-grade by S&P or Moody's, or which are similarly rated by another Rating Organization or are unrated but deemed by the Adviser to be comparable to instruments so rated.
The Fund's investments in obligations rated below the four highest ratings of S&P and Moody's have different risks than investments in securities that are rated "investment-grade." Risk of loss upon default by the borrower is significantly greater because lower-rated securities are generally unsecured and are often subordinated to other creditors of the issuer, and because the issuers frequently have high levels of indebtedness and are more sensitive to adverse economic conditions, such as recessions, individual corporate developments and increasing interest rates than are investment-grade issuers. As a result, the market price of such securities, and the net asset value of the Fund's Shares, may be particularly volatile.
Additional risks associated with lower-rated fixed income securities are
(a) the relatively low trading market liquidity for the securities and (b) the
creditworthiness of the issuers of such securities. During an economic downturn
or substantial period of rising interest rates, highly-leveraged issuers may
experience financial stress that would adversely affect their ability to service
their principal and interest payment obligations, to meet projected business
goals and to obtain additional financing. An economic downturn could also
disrupt the market for lower-rated bonds generally and adversely affect the
value of outstanding bonds and the ability of the issuers to repay principal and
interest. If the issuer of a lower-rated security held by the Fund defaulted,
the Fund could incur additional expenses to seek recovery. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may also
decrease the values and liquidity of lower-rated securities held by the Fund,
especially in a thinly traded market. Finally, the Fund's trading in fixed
income securities entails risks that capital losses rather than gains will
result. As a result, investment in the Fund should not be considered a complete
investment program.
The Adviser will continually evaluate lower-rated securities and the ability of their issuers to pay interest and principal. The Fund's ability to achieve its investment objectives may be more dependent on the Adviser's credit analysis than might be the case for a fund that invested in higher rated securities. See the "Appendix" in the Statement of Additional Information for a general description of securities ratings.
Mortgage-Backed and Asset-Backed Securities
Mortgage-backed securities, like other fixed income instruments, may be subject to risks, including price fluctuations due to interest rate changes. The returns on mortgage-backed securities may also be negatively affected by changes in principal pre-payment rates due to interest rate volatility.
Mortgage-related securities acquired by the Fund may include collateralized mortgage obligations ("CMOs"), a type of derivative, issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, Government National Mortgage Association or other U.S. Government agencies or instrumentalities, as well as by private issuers. CMOs may involve additional risks other than those found in other types of mortgage-related obligations in that they may exhibit more price volatility and interest rate risk than such obligations. During periods of rising interest rates, CMOs may lose their liquidity as CMO market makers may choose not to repurchase, or may offer prices based on current market conditions, which are unacceptable to a fund based on the fund's analysis of the market value of the security. See "Investment Objectives and Policies" in the Statement of Additional Information.
Asset-backed securities are also subject to declines in market value during periods of rising interest rates. Due to the possibility of prepayment of the underlying obligations, asset-backed securities have less potential for capital appreciation than other debt securities of comparable maturities during periods of declining interest rates. As a result, asset-backed securities may be less effective than other fixed income securities as a means of locking in attractive interest rates for the long term.
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 the securities at an agreed-upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940 (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Fund will maintain in a segregated account with the Fund's Custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement and will monitor the account to ensure that such value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase. The Fund may also enter into "dollar rolls," in which it sells fixed income securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, 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.
Foreign Securities Risk
The Fund may invest in foreign securities, as described above. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operating in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. 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 assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. See "Investment Objectives and Policies -- Foreign Securities" in the Statement of Additional Information.
Foreign Currency Exchange Transactions
Because the Fund may buy and sell securities denominated in currencies other than the U.S. dollar, and may receive interest and sale proceeds in currencies other than the U.S. dollar, the Fund from time to time may enter into foreign currency exchange transactions to convert the U.S. dollar to foreign currencies, to convert foreign currencies to the U.S. dollar and to convert foreign currencies to other foreign currencies. Forward foreign currency exchange contracts are agreements to exchange one currency for another -- for example, to exchange a certain amount of U.S. dollars for a certain amount of Japanese yen -- at a future date and at a specified price.
Typically, the other party to a currency exchange contract will be a commercial bank or other financial institution. A fund either enters into these transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or uses forward contracts to purchase or sell foreign currencies.
Forward foreign currency exchange contracts also allow the Fund to hedge the currency risk of portfolio securities denominated in a foreign currency. This technique permits the assessment of the merits of a security to be considered separately from the currency risk. By separating the asset and the currency decision, it is possible to focus on the opportunities presented by the security apart from the currency risk. Although forward foreign currency exchange contracts are of short duration, generally between one and twelve months, the forward foreign currency exchange contracts are rolled over in a manner consistent with a more long-term currency decision. There is a risk of loss to the Fund if the other party does not complete the transaction.
European Currency Unification.
Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Fund may invest and may result in the Fund facing additional risks in pursuing its investment objective. These risks, which include, but are not limited to, uncertainty as to the proper tax treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of the Fund's net asset value per share.
When-Issued Purchases and Forward Commitments.
The Fund may purchase securities on a when-issued basis or enter into forward commitment transactions. When the Fund agrees to purchase securities on a when-issued basis or enters into a forward commitment to purchase securities, the Custodian will set aside cash, U.S. Government securities or other liquid assets equal to the amount of the purchase or the commitment in a separate account. As a result, the Fund's liquidity and ability to manage its portfolio might be affected in the event its when-issued purchases or forward commitments ever exceeded 25% of the value of its assets. In the case of a forward commitment to sell portfolio securities, the Custodian will hold the portfolio securities in a segregated account while the commitment is outstanding. When the Fund engages in when-issued and forward commitment transactions, it relies on the other party to consummate the trade. Failure of such party to do so may result in the Fund incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Year 2000
The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems
in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on the Adviser's provision of investment advisory services, including the handling of securities trades pricing. Both the Adviser and PFPC have advised RBB that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that the Adviser or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
General
The Fund's use of certain investment techniques, including derivatives, options and futures transactions, will subject the Fund to greater risk than Funds that do not employ such techniques.
Investment methods described in this Prospectus are among those which the Fund has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
Board of Directors
The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors.
Investment Adviser
Boston Partners Asset Management, L.P., located at 28 State Street, 21st Floor, Boston, Massachusetts 02109, serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other institutional accounts that had aggregate total assets under management as of ____________, 1998 in excess of $____ billion. The adviser is organized as a Delaware limited partnership whose sole general partner is Boston Partners, Inc., a Delaware corporation.
Subject to the supervision and direction of RBB's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objectives and policies, makes investment decisions for the Fund, places orders to purchase and sell securities, and employs professional portfolio managers and securities analysts who provide research services to the Fund. For its services to the Fund, the Adviser is paid an advisory fee computed at an annual rate of 0.40% of the Fund's average daily net assets, which is calculated daily and paid monthly. The Adviser has notified RBB, however, that it intends to waive advisory fees in excess of ____% during the Fund's current fiscal year.
Portfolio Management
The day-to-day portfolio management of the Fund is the responsibility of William R.
Leach who is a senior portfolio manager of the Adviser and Chairman of the Fixed Income Strategy Committee. Prior to joining the Adviser in April 1995, Mr. Leach was employed by The Boston Company Asset Management, Inc. ("The Boston Company") from 1988 through April 1995 where he was a senior portfolio manager and Director of the Fixed Income Strategy Committee. Mr. Leach has over 16 years of investment experience and is a Chartered Financial Analyst ("CFA"). Mr. Leach will be assisted by Glenn S. Davis, Joseph F. Feeney, Jr. and Michael A. Mullaney. Mr. Davis is a Fixed Income Portfolio Manager with the Adviser and is also a CFA. Prior to joining the Adviser in April 1995, he was Vice President and Portfolio Manager at The Boston Company, specializing in short and intermediate term corporate bonds. Prior to that position, he was responsible for the Short-term Fixed Income Group at State Street Global Advisors. He has a total of 17 years of investment experience. Mr. Feeney is a Fixed Income Portfolio Manager with the Adviser and also a CFA. Prior to joining the Adviser in April 1995, he was Assistant Vice President and Mortgage-backed Securities Portfolio Manager for Putnam Investments. Mr. Mullaney is a Fixed Income Portfolio Manager who joined the Adviser in June 1997. From 1984 to 1997, he was employed at Putnam Investments, most recently as Managing Director and Senior Investment Strategist, specializing in portfolio strategy and management. His prior experience included a position as a senior Consultant from 1981 to 1983 with Chase Econometrics/Interactive Data Corporation, where he focused on quantitative methodologies in fixed income and equity management. He has over 16 years of investment experience.
Administrator
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. PFPC's principal offices are located at 400 Bellevue Parkway, Wilmington, Delaware 19809. For its services, PFPC receives a fee calculated at an annual rate of .125% of the Fund's average daily net assets with a minimum annual fee of $75,000 payable monthly on a pro rata basis.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank, National Association ("PNC Bank") serves as the Fund's Custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. PFPC may enter into shareholder servicing agreements with registered broker-dealers who have entered into dealer agreements with the Distributor ("Authorized Dealers") for the provision of certain shareholder support services to customers of such Authorized Dealers who are shareholders of the Fund. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Distributor
Provident Distributors, Inc. ("PDI"), whose principal business address is Four Falls Corporate Center, West Conshohocken, Pennsylvania 19428, acts as distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares.
Expenses
The expenses of the Fund are deducted from its total income before dividends are paid. These expenses include, but are not limited to: fees paid to the Adviser and PFPC; distribution fees; fees and expenses of officers and directors who are not affiliated with any of RBB's investment advisers, sub-advisers or the Distributor; taxes; interest; legal fees; custodian fees; auditing fees; brokerage fees and commissions; certain of the fees and expenses of registering and qualifying the Fund and the Shares for distribution under federal and state securities laws; expenses of preparing prospectuses and statements of additional information and of printing and distributing them annually to existing shareholders that are not attributable to a particular class of shares of RBB; the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of RBB; fidelity bond and directors and officers liability insurance premiums; the expense of using independent pricing services; and other expenses that are not expressly assumed by the Adviser under its investment advisory agreement with respect to the Fund. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios. Distribution expenses, transfer agency expenses, expenses of preparation, printing and distributing prospectuses, statements of additional information, proxy statements and reports to shareholders, and registration fees, identified as belonging to a particular class, are allocated to such class.
The Adviser may assume expenses of the Fund from time to time. To the extent any service providers assume expenses of the Fund, such assumption of expenses will have the effect of lowering the Fund's overall expense ratio and increasing its yield to investors.
The Board of Directors of RBB approved and adopted a Distribution Agreement and Plan of Distribution for the Shares (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Fund a distribution fee, which is accrued daily and paid monthly, of up to 0.25% on an annualized basis of the average daily net assets of the Fund. The actual amount of such compensation under the Plan is agreed upon by RBB's Board of Directors and by the Distributor in the Distribution Agreement. The Distributor may, in its discretion, from time to time waive voluntarily all or any portion of its distribution fee.
Amounts paid to the Distributor under the Plan may be used by the Distributor to cover expenses that are related to (i) the sale of Investor 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 Investor Shares of the Fund, all as set forth in the Plan. The Distributor may delegate some or all of these functions to Service Agents. See "How to Purchase Shares -- Purchases Through Intermediaries."
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Fund the fee agreed to under the Distribution Plan. Payments under the Plan are not tied exclusively to expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
Purchases Through Intermediaries.
Shares of the Fund may be available through various brokerage firms, financial institutions and programs sponsored by other industry professionals (collectively, "Service Organizations"). Certain features of the Shares, such as the initial and subsequent investment
minimums and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose transaction or administrative charges or other direct fees, which charges or fees would not be imposed if Fund Shares are purchased directly from the Fund. Therefore, a client or customer should contact the Service Organization acting on his behalf concerning the fees (if any) charged in connection with a purchase or redemption of Fund Shares and should read this Prospectus in light of the terms governing his accounts with the Service Organization. Service Organizations 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 Organizations 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 Organization could be held liable for resulting fees or losses.
For administration, subaccounting, transfer agency and/or other services, the Adviser or the Distributor or their affiliates may pay Service Organizations 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 Organizations or recordkeepers. The Service Fee payable to any one Service Organization or recordkeeper is determined based upon a number of factors, including the nature and quality of the services provided, the operations processing requirements of the relationship and the standardized fee schedule of the Service Organization or recordkeeper. The Adviser, the Distributor or either of their affiliates may, at their own expense, provide promotional incentives for qualified recipients who support the sale of Shares 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 one or more Boston Partners Funds. Travel, meals and lodging may also be paid 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 Fund Shares.
General
Shares representing interests in the Fund are offered continuously for sale by the Distributor and may be purchased without imposition of a sales charge. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application to the Fund's transfer agent, PFPC. Purchases of Shares may be effected by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Boston Partners Bond Fund" c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. The name of the Fund, Boston Partners Bond Fund, must also appear on the check or Federal Reserve Draft. Shareholders may not purchase shares of the Boston Partners Bond Fund with a check issued by a third party and endorsed over to the fund. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $2,500 and subsequent investments must be at least $100. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day and on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased initially or acquired through the exercise of an exchange privilege is based on the net asset value next computed after a purchase order is received in good order by the Fund or its agents. Orders received by the Fund or its agents after the close of regular trading on the New York Stock Exchange, Inc. (currently 4:00 p.m., Eastern time) are priced at the net asset value next determined on the following business day. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
Provided that the investment is at least $2,500, an investor may also purchase Shares by having his bank or his broker wire Federal Funds to PFPC. An investor's bank or broker may impose a charge for this service. The Fund does not currently impose a service charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire, for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 261-4073, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-1108-2507
FROM: (name of investor)
ACCOUNT NUMBER: (Investor's account number with the Fund)
FOR PURCHASE OF: Boston Partners Bond Fund
AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process purchases until it receives a fully completed and signed application.
For subsequent investments, an investor should follow steps A and B above.
Automatic Investing
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account. Investors desiring to participate in the Automatic Investment Plan should call the Fund's transfer agent, PFPC, at (888)261-4073 to obtain the appropriate forms.
Retirement Plans
Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and
rollover IRAs where PNC Bank acts as Custodian. For further information as to applications and annual fees, contact PFPC at (888) 261-4073. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption By Mail
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Boston Partners Bond Fund c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. There is no charge for a redemption.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Systematic Withdrawal Plan
If your account has a value of at least $10,000, you may establish a Systematic Withdrawal Plan and receive regular periodic payments. A request to establish a Systematic Withdrawal Plan must be submitted in writing to PFPC at P.O. Box 8852, Wilmington, Delaware 19899-8852. Each withdrawal redemption will be processed on or about the 25th of the month and mailed as soon as possible thereafter. There are no service charges for maintenance; the minimum amount that you may withdraw each period is $100. (This is merely the minimum amount allowed and should not be mistaken for a recommended amount.) The holder of a Systematic Withdrawal Plan will have any income dividends and any capital gains distributions reinvested in full and fractional shares at net asset value. To provide funds for payment, Shares will be redeemed in such amount as is necessary at the redemption price, which is net asset value next determined after the Fund's receipt of a redemption request. Redemption of Shares may reduce or possibly exhaust the Shares in your account, particularly in the event of a market decline. As with other redemptions, a redemption to make a withdrawal payment is a sale for federal income tax purposes. Payments made pursuant to a Systematic Withdrawal Plan cannot be considered as actual yield or income since part of such payments may be a return of capital.
You will ordinarily not be allowed to make additional investments of less than the aggregate annual withdrawals under the Systematic Withdrawal Plan during the time you have the plan in effect and, while a Systematic Withdrawal Plan is in effect, you may not make periodic investments under the Automatic Investment Plan. You will receive a confirmation of each transaction showing the sources of the payment and the Share and cash balance remaining in your plan. The plan may be terminated on written notice by the shareholder or by the Fund and will terminate automatically if all Shares are liquidated or withdrawn from the account or upon the death or incapacity of the shareholder. You may change the amount and schedule of withdrawal payments or suspend such payments by giving written notice to the Fund's transfer
agent at least seven Business Days prior to the end of the month preceding a scheduled payment.
Involuntary Redemption
RBB reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents 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 law. If the Shares to be redeemed have been recently purchased by check, PFPC may delay mailing a redemption check, for up to 15 days, pending a determination that the check has cleared. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that it is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
Exchange Privilege
The exchange privilege is available to shareholders residing in any state in which the Shares being acquired may be legally sold. A shareholder may exchange Shares of the Fund for Investor Shares of any other Boston Partners Fund of RBB, subject to the restrictions described under "Exchange Privilege Limitations" below. Such exchange will be effected at the net asset value of the exchanged Fund and the net asset value of the Fund being acquired next determined after receipt of a request for an exchange by the Fund or its agents. An exchange of Shares will be treated as a sale for federal income tax purposes. See "Taxes." A shareholder wishing to make an exchange may do so by sending a written request to PFPC.
If the exchanging shareholder does not currently own Investor Shares of the Boston Partners Fund into which he would like to exchange, a new account will be established with the same registration, dividend and capital gain options as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted. The exchange privilege may be modified or terminated at any time, or from time to time, by RBB, upon 60 days' written notice to shareholders.
If an exchange is to a new account in the acquired Fund, the dollar value of Investor Shares acquired must equal or exceed that Fund's minimum for a new account; if to an existing account, the dollar value must equal or exceed that Fund's minimum for subsequent investments. If any amount remains in the Fund from which the exchange is being made, such amount must not drop below the minimum account value required by the Fund.
Exchange Privilege Limitations
The Fund's exchange privilege is not intended to afford shareholders a way to speculate on short-term movements in the market. Accordingly, in order to prevent excessive use of the exchange privilege that may potentially disrupt the management of the Funds and increase transactions costs, the Fund has established a policy of limiting excessive exchange activity.
Shareholders are entitled to six (6) exchange redemptions (at least 30 days apart) from the Fund during any twelve-month period. Notwithstanding these limitations, the Fund reserves the right to reject any purchase request (including purchases by exchange) that is deemed to be disruptive to efficient portfolio management.
Telephone Transactions
In order to request an exchange or redemption by telephone, a shareholder must have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Exchange Authorization Form must be filed with PFPC. These forms are available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the exchange or redemption by calling (888) 261-4073. Neither RBB, the Fund, the Distributor, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures: (1) requiring the appropriate telephone transaction privilege forms; (2) requiring the caller to provide the names of the account owners, the account social security number and name of the Fund, all of which must match RBB's records; (3) requiring RBB's service representative to complete a telephone transaction form, listing all of the above caller identification information; (4) permitting exchanges only if the two account registrations are identical; (5) requiring that redemption proceeds be sent only by check to the account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (6) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) business days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Fund elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than the Distributor), financial institutions, securities dealers, financial planners and other industry professionals, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by an attorney-in-fact under a power of attorney.
The net asset value for each class of the Fund is 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 by the total number of outstanding shares of the class. The net asset value is calculated as of the close of regular trading on the NYSE on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of RBB'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.
With the approval of the Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income monthly. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
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. 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) 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, whether such gain was reflected in the price paid for the Shares, or whether such gain was attributable to bonds bearing tax-exempt interest. All other distributions, to the extent they are taxable, are taxed to shareholders as ordinary income.
RBB will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in 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 shares immediately prior to a distribution will nevertheless be taxed on the entire amount of the distribution received, although the distribution is, in effect, a return of capital.
Shareholders who exchange shares representing interests in one Fund for shares representing interests in another Fund will generally recognize capital gain or loss for federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. federal income tax treatment.
The Fund offers one other class of shares, Institutional Shares, which is offered directly to institutional investors pursuant to a separate prospectus. Shares of each class represent equal pro rata interests in the Fund and accrue dividends and calculate net asset value and performance quotations in the same manner. The Fund will quote performance of Institutional Shares separately from Investor Shares. Because of different fees paid by the Investor Shares, the total return on such shares can be expected, at any time, to be different than the total return on Institutional Shares. Information concerning the other class may be obtained by calling the Fund at (800) 311-9783 or 9829.
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock. See "Description of Shares" in the Statement of Additional Information."
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE BOSTON PARTNERS BOND FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE BOSTON PARTNERS BOND 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, even where a share has a different class designation than another share representing an interest in the Fund. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB 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, RBB will assist in shareholder 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. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional
Information under "Additional Information Concerning Fund Shares" for examples of when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of _________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to the Fund's transfer agent, PFPC Inc., at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (888) 261-4073.
Share Certificates
In the interest of economy and convenience, physical certificates representing shares in the Fund are not normally issued.
Historical Performance Information
For the period from commencement of operations (December 30, 1998) through August 31, 1998, the total return since inception (not annualized) for the Investor Class of Shares of the Fund was as follows:
Unannualized investment returns for the period ended August 31, 1998
The total return assumes reinvestment of all dividends and capital gains and reflects expense reimbursements and investment advisory fee waivers in effect. Without these expense reimbursements waivers, the Fund's performance would have been lower. Of course, past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that Shares, when redeemed, may be worth more or less than the original cost. For more information on performance, see "Performance Information" in the Statement of Additional Information.
The table below presents the Composite performance history of certain of the Adviser's managed accounts on an annualized basis since inception and for the year ended September 30, 1998. The Composite is comprised of all of the Adviser's institutional accounts and other privately managed accounts with investment objectives, policies and strategies substantially similar to those of the Fund, although the accounts have operating histories, whereas the Fund had not commenced operations until December 30, 1997. The Composite performance information includes the reinvestment of interest received by the underlying securities, realized and unrealized gains and losses, and reflects the payment of investment advisory fees and transaction expenses. The Composite performance does not include custody fees or administrative fees that may be charged by banks, fiduciaries, or other third parties in connection with these institutional and privately managed accounts. The privately managed accounts in the Composite are only available to the Adviser's institutional advisory clients. The past performance of the accounts which comprise the Composite is not indicative of the future performance of the Fund. These accounts have lower investment advisory fees than the Fund and the Composite performance figures would have been lower if subject to the higher fees and expenses to be incurred by the Fund. These private accounts are also not subject to the same investment limitations, diversification requirements and other restrictions which are imposed upon mutual funds under the 1940 Act and the Internal Revenue Code, which, if imposed, may have adversely affected the performance results of the Composite. Listed below the performance history for the Composite is a comparative index comprised of securities similar to those in which accounts contained in the Composite are invested.
Average annualized investment returns for the period ended September 30, 1998
Since
One Year Inception*
-------- ----------
Composite Performance..................... ____% ___%
Lehman Brothers Aggregate
Bond Index................................ ____% ___%
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* The Adviser commenced managing these accounts on June 1, 1995.
The Lehman Brothers Aggregate Bond Index is a broad market-weighted index, which encompasses three major classes of investment-grade fixed income securities with maturities greater than one year, including U.S. Treasury securities, corporate bonds and mortgage-backed securities.
Future 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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Lehman Brothers Aggregate Bond Index. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as Business Week, Fortune, Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
[THIS PAGE INTENTIONALLY LEFT BLANK]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'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 RBB OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
Page
INTRODUCTION...................................... 3
INVESTMENT OBJECTIVES AND POLICIES................ 3
INVESTMENT LIMITATIONS............................ 4
RISK FACTORS...................................... 5
MANAGEMENT........................................ 8
DISTRIBUTION OF SHARES............................ 11
HOW TO PURCHASE SHARES............................ 12
HOW TO REDEEM AND EXCHANGE SHARES................. 13
NET ASSET VALUE................................... 17
DIVIDENDS AND DISTRIBUTIONS....................... 17
TAXES............................................. 17
MULTI-CLASS STRUCTURE............................. 18
DESCRIPTION OF SHARES............................. 18
OTHER INFORMATION................................. 19
Investment Adviser
Boston Partners Asset Management, L.P.
Boston, Massachusetts
Custodian
PNC Bank, N.A.
Philadelphia, Pennsylvania
Transfer Agent
PFPC Inc.
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
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Independent Accountants
PROSPECTUS
_________, 1998
BOSTON PARTNERS
BOND FUND
(Investor Shares)
bp
BOSTON PARTNERS ASSET
MANAGEMENT, L.P.
Boston Partners Bond Fund bp
(Investor Class) BOSTON PARTNERS ASSET MANAGEMENT, L.P.
ACCOUNT APPLICATION
Please Note: Do not use this form to open a retirement plan account. For an
IRA application or help with this Application, please call 1-888-261-4073
1 (Please check the appropriate box(es) below.) Account Registration: 1 Individual 2 Joint Tenant 3 Other
For joint accounts, the account registrants will be joint tenants with right of survivorship and not tenants in common unless tenants in common or community property registrations are requested.
CORPORATION,
PARTNERSHIP,
TRUST OR
OTHER ENTITY: _________________________________________________________________
NAME OF CORPORATION, PARTNERSHIP, NAME(S) OF TRUSTEE(S)
OR OTHER
_________________________________________________________________
TAXPAYER IDENTIFICATION NUMBER
_________________________________________________________________
2 STREET OR P.O. BOX AND/OR APARTMENT NUMBER
Mailing
Address: _________________________________________________________________
CITY STATE ZIP CODE
_________________________________________________________________
DAY PHONE NUMBER EVENING PHONE NUMBER
3 Minimum initial investment Amount of investment $____________
Investment of $2,500.
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Information:
Make the check payable to Boston Partners Bond Fund.
Shareholders may not purchase shares of this Fund with a check issued by a third party and endorsed over to the Fund.
NOTE: Dividends and capital gains may be reinvested or paid by check. If no options are selected below, both dividends and capital gains will be reinvested in additional Fund shares.
DISTRIBUTION
OPTIONS:
Dividends 5 Pay by check 6 Reinvest 7 Capital Gains 8 Pay by check 9 Reinvest 10
To select this portion please fill out the information below:
Amount_______________ Startup Month__________________
SYSTEMATIC
WITHDRAWAL Frequency Options: Annually 11 Monthly 12 Quarterly 13
PLAN
- A minimum account value of $10,000 in a single account is required to establish a Systematic Withdrawal Plan.
- Payments will be made on or near the 25th of the month.
Please check one of the following options:
_____ Please mail checks to Address of Record (Named in
Section 2)
_____ Please electronically credit my Bank of Record
(Named in Section 5)
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4 To use this option, you must initial the appropriate line below.
Telephone
Exchange and I authorize the Transfer Agent to accept instructions from any
Redemption: persons to redeem or exchange shares in my account(s) by
telephone in accordance with the procedures and conditions set
forth in the Fund's current prospectus.
______________________ _________________ Redeem shares, and
individual initial joint initial send the proceeds to
the address of record.
______________________ _________________ Exchange shares for
individual initial joint initial shares of The Boston
Partners Large Cap
Value Fund, Mid Cap
Value Fund, Micro Cap
Value Fund, Market
Neutral Fund or Long-
Short Equity Fund.
5 The Automatic Investment Plan which is available to shareholders
Automatic of the Fund, makes possible regularly scheduled purchases of Fund
Investment shares to allow dollar-cost averaging. The Fund's Transfer Agent
Plan: can arrange for an amount of money selected by you to be deducted
from your checking account and used to purchase shares of the
Fund.
Please debit $________ from my checking account (named below) on
or about the 20th of the month. Please attach an unsigned, voided
check.
14 Monthly 15 Every Alternate Month 16 Quarterly
17 Other
BANK OF _________________________________________________________________
RECORD: BANK NAME STREET ADDRESS OR P.O. BOX
_________________________________________________________________
CITY STATE ZIP CODE
_________________________________________________________________
BANK ABA NUMBER BANK ACCOUNT NUMBER
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6 The undersigned warrants that I (we) have full authority and, if
Signatures: a natural person, I (we) am (are) of legal age to purchase shares
pursuant to this Account Application, and I (we) have received a
current prospectus for the Fund in which I (we) am (are)
investing.
Under the Interest and Dividend Tax Compliance Act of 1983, the
Fund is required to have the following certification:
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct
taxpayer identification number (or I am
waiting for a number to be issued to), and
(2) I am not subject to backup withholding
because (a) I am exempt from backup
withholding, or (b) I have not been notified
by the Internal Revenue Service that I am
subject to 31% backup withholding as a
result of a failure to report all Interest
or dividends, or (c) the IRS has notified me
that I am no longer subject to backup
withholding.
Note: You must cross out item (2) above if you have been notified
by the IRS that you are currently subject to backup withholding
because you have failed to report all interest and dividends on
your tax return. The Internal Revenue Service does not require
your consent to any provision of this document other than the
certification required to audit backup withholding.
_________________________________________________________________
SIGNATURE OF APPLICANT DATE
_________________________________________________________________
PRINT NAME TITLE (IF APPLICABLE)
_________________________________________________________________
SIGNATURE OF JOINT OWNER DATE
_________________________________________________________________
PRINT NAME TITLE (IF APPLICABLE)
|
(If you are signing for a corporation, you must indicate corporate office or title. If you wish additional signatories on the account, please include a corporate resolution. If signing as a fiduciary, you must indicate capacity.)
For information on additional options, such as IRA Applications, rollover requests for qualified retirement plans, or for wire instructions, please call us at 1-888-261-4073.
Mail completed Account Application and check to:
The Boston Partners Bond Fund c/o PFPC Inc. P.O. Box 8852 Wilmington, DE 19899-8852
BOSTON PARTNERS MICRO CAP VALUE FUND
(Institutional Shares)
of
The RBB Fund, Inc.
Boston Partners Micro Cap Value Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares of the Institutional Class ("Shares") offered by this Prospectus represent interests in the Fund. The Fund is a diversified fund that seeks long-term growth of capital, with current income as a secondary objective, primarily through equity investments, such as common stocks. It seeks to achieve its objectives by investing at least 65% of its total assets in a diversified portfolio consisting of equity securities of issuers with market capitalizations that do not exceed $500 million when purchased by the Fund, and identified by Boston Partners Asset Management, L.P. (the "Adviser") as equity securities that it believes possess value characteristics. The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
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 and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund by calling (800) 311-9783 or 9829. The Prospectus and the Statement of Additional Information are available for reference, along with other related materials, on the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS
______, 1998
EXPENSE TABLE
The following table illustrates the shareholder transaction and annual operating expenses incurred by Institutional Shares of the Fund (after fee waivers and expense reimbursements) for the fiscal period ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases.............................None
Maximum Sales Charge Imposed on Reinvested Dividends..................None
Maximum Deferred Sales Charge.........................................None
Redemption Fee(1)....................................................1.00%
Exchange Fee..........................................................None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees (after waivers)(2)...................................____%
12b-1 Fees ..........................................................0.00%
Other Expenses (after expense reimbursements)(2).....................____%
Total Fund Operating Expenses (after waivers and
expense reimbursements)(2)........................................ %
====
----------
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(1) To prevent the Fund from being adversely affected by the transaction costs associated with short-term shareholder transactions, the Fund will redeem shares at a price equal to the net asset value of the shares, less an additional transaction fee equal to 1.00% of the net asset value of all such shares redeemed that have been held for less than one year. Such fees are not sales charges or contingent deferred sales charges, but are retained by the Fund for the benefit of all shareholders.
(2) In the absence of fee waivers and expense reimbursements, Management Fees would be 1.25%, Other Expenses would be ____%, and Total Fund Operating Expenses would be ____%. Management Fees are based on average daily net assets and are calculated daily and paid monthly.
Example
An investor would pay the following expenses on a $1,000 investment in the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each time period (including the 1.00% transaction fee on redemptions made within a year of purchase):
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
Boston Partners Micro Cap Value Fund $ $ $ $
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The 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 the various costs and expenses, see "Management" below.) The Fee Table reflects expense reimbursements and voluntary waivers of Management Fees for the Fund, which are expected to be in effect during the current fiscal year. However, the Adviser, and the Fund's other service providers are under no obligation with respect to such expense reimbursements and waivers and there can be no assurance that any future expense reimbursements and waivers of Management Fees will not vary from the figures reflected in the Fee Table.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The "Financial Highlights" presented below set forth certain investment results for shares of the Institutional Class of the Fund for the period July __, 1998 (date of inception) through August 31, 1998. The financial data included in this table should be read in conjunction with the financial statements and notes thereto and the unqualified report of _________________________, RBB's independent accountant, which are incorporated by reference into the Statement of Additional Information. Further information about the performance of the Institutional Class of the Fund is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on page 1 of the prospectus.
BOSTON PARTNERS MICRO CAP VALUE FUND
(For an Institutional Share outstanding throughout each period)
Per Share Operating Performance**
Net asset value, beginning of period........................
Net investment income (1)...................................
Net realized and unrealized gain on investments(2)..........
Net increase in net assets resulting
from operations.............................................
Net asset value, end of period..............................
Total investment return(3)..................................
Ratios/Supplemental Data
Net assets, end of period (000).............................
Ratio of expenses to average net
assets***(1)(4)...........................................
Ratio of net investment income to
average net assets***(1)..................................
Portfolio turnover rate****.................................
Average commission rate per share(5)........................
(3) Total return is calculated assuming a purchase of shares on the first
day and a sale of shares on the last day of the period reported and
will include reinvestments of dividends and distributions, if any.
Total return is not annualized.
(4) Without the waiver of advisory, administrative services, administration
and transfer agent fees and without the reimbursement of certain
operating expenses, the ratio of expenses to average net assets
annualized for the period ended August 31, 1998 would have been ____%
for the Institutional Class.
(5) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period subject to such
commissions.
INTRODUCTION
RBB is an open-end management investment company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interests in the Boston Partners Micro Cap Value Fund. RBB was incorporated in Maryland on February 29, 1988.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to provide long-term growth of capital, with current income as a secondary objective, primarily through equity investments, such as common stocks. The Fund seeks to achieve its objective by investing, under normal market conditions, at least 65% of its total assets in a diversified portfolio consisting primarily of equity securities of issuers with market capitalizations that do not exceed $500 million when purchased by the Fund, and identified by the Adviser as equity securities that it believes possess value characteristics.
The Fund generally invests in the equity securities of small companies. The Adviser will seek to invest in companies it considers to be well managed and to have attractive fundamental financial characteristics. The Adviser believes greater potential for price appreciation exists among small companies since they tend to be less widely followed by other securities analysts and thus may be more likely to be undervalued by the market. The Fund may invest from time to time a portion of its assets, not to exceed 35% (under normal conditions) at the time of purchase, in companies with considerably larger market capitalizations.
The Fund presents greater risks than funds that invest in equity securities of larger companies for the following reasons: Companies in which the Fund primarily invests will include those that have limited product lines, markets, or financial resources, or are dependent upon a small management group. In addition, because these stocks are not well known to the investing public, do not have significant institutional ownership, and are followed by relatively few securities analysts, there will normally be less publicly available information concerning these securities compared to what is available for the securities of larger companies. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, can decrease
the value and liquidity of securities held by the Fund. Historically, small capitalization stocks have been more volatile in price than larger capitalization stocks. Among the reasons for the greater price volatility of these small company stocks are the less certain growth prospects of smaller firms, the lower degree of liquidity in the markets for such stocks, the greater sensitivity of small companies to changing economic conditions, the fewer market makers and the wider spreads between quoted bid and asked prices which exist in the over-the-counter market for such stocks. Besides exhibiting greater volatility, small company stocks may, to a degree, fluctuate independently of larger company stocks. Small company stocks may decline in price as large company stocks rise, or rise in price as large company stocks decline. Investors should therefore expect that the Fund will be more volatile than, and may fluctuate independently of, broad stock market indices such as the Standard & Poor's 500 Composite Stock Price Index.
The securities in which the Fund invests will often be traded only in the over-the-counter market or on a regional securities exchange, may be listed only in the quotation service commonly known as the "pink sheets," and may not be traded every day or in the volume typical of trading on a national securities exchange. They may be subject to wide fluctuations in market value. The trading market for any given security may be sufficiently thin as to make it difficult for the Fund to dispose of a substantial block of such securities. The disposition by the Fund of portfolio securities to meet redemptions or otherwise may require the Fund to sell these securities at a discount from market prices or during periods when, in the Adviser's judgment, such disposition is not desirable or to make many small sales over a lengthy period of time.
The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
The Adviser selects securities for the Fund based on a fundamental analysis of industries and companies, earning power and growth and other investment criteria. In general, the Fund's investments are broadly diversified over a number of industries and, as a matter of policy, the Fund will not invest 25% or more of its total assets in any one industry.
The Fund may invest up to 25% of its total assets in securities of foreign issuers, including American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs"). Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operating in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. 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 assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to
uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. ADRs and EDRs are receipts issued by a U.S. bank or trust company evidencing ownership of underlying securities issued by a foreign issuer. ADRs and EDRs may be listed on a national securities exchange or may trade in the over-the-counter market. ADR and EDR prices are denominated in U.S. dollars, even though the underlying security may be denominated in a foreign currency. The underlying security may be subject to foreign government taxes which would reduce the yield on such securities. Investments in such instruments involve risks similar to those of investing directly in foreign securities. See "Investment Objectives and Policies--Foreign Securities" in the Statement of Additional Information.
The Fund may invest the remainder of its total assets in derivative securities; debt securities issued by U.S. banks, corporations and other business organizations that are investment grade securities; and debt securities issued by the U.S. government or government agencies.
In accordance with the above-mentioned policies, the Fund may also invest in indexed securities, repurchase agreements, reverse repurchase agreements, dollar rolls, financial futures contracts, options on futures contracts and may lend portfolio securities. See "Investment Objectives and Policies" in the Statement of Additional Information.
The Fund may invest in registered investment companies and investment funds in foreign countries subject to the provisions of the Investment Company Act of 1940, as amended (the "1940 Act"), and as discussed in "Investment Objectives and Policies" in the Statement of Additional Information. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
While the Adviser intends to fully invest the Fund's assets at all times in accordance with the above-mentioned policies, the Fund reserves the right to hold up to 100% of its assets, as a temporary defensive measure, in cash and eligible U.S. dollar-denominated money market instruments. The Adviser would determine when market conditions warrant temporary defensive measures.
The Fund's investment objective and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in the Fund.
INVESTMENT LIMITATIONS
The Fund may not change the following investment limitations without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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.
If a percentage restriction under one of the Fund's investment policies or restrictions or the use of assets is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
The Fund presently has no intention to participate as a purchaser in any initial public offering of securities that may trade at a premium in the secondary market when such a secondary market exists, although it reserves the ability to participate in such offerings in the future.
Portfolio Turnover
The Fund retains the right to sell securities irrespective of how long they have been held. The Adviser estimates that the annual turnover in the Fund will not exceed 150% during the current fiscal year. Such a relatively high portfolio turnover will be accompanied by relatively high transactional (i.e., brokerage) costs. It may also result in increased capital gains realized by the Fund and distributed to shareholders.
RISK FACTORS
As with other mutual funds, there can be no assurance that the Fund will achieve its objective. The net asset value per share of Shares representing an interest in the Fund will fluctuate as the values of its portfolio securities change in response to changing conditions in the equity market. An investment in the Fund is not intended to constitute a balanced investment program. As of the date of this Prospectus, U.S. stock markets were trading at or close to record high levels and there can be no guarantee that such levels will continue. Other risk factors are discussed above under "Investment Objectives and Policies" and in the Statement of Additional Information under "Investment Objectives and Policies."
European Currency Unification. Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Fund may invest and may result in the Fund facing additional risks in pursuing its investment objective. These risks, which include, but are not limited to, uncertainty as to the proper tax treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of the Fund's net asset value per share.
Year 2000. The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on the Adviser's provision of investment advisory services, including the handling of securities trades pricing. Both the Adviser and PFPC have advised RBB that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that the Adviser or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
General. Investment methods described in this Prospectus are among those which the Fund has the power to utilize. Some may be employed on a regular basis; others may not be
used at all. 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 RBB and the Fund are managed under the direction of RBB's Board of Directors.
Investment Adviser
Boston Partners Asset Management, L.P., located at 28 State Street, 21st Floor, Boston, Massachusetts 02109, serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other institutional accounts that had aggregate total assets under management as of ________, 1998, in excess of $__ billion. The adviser is organized as a Delaware limited partnership whose sole general partner is Boston Partners, Inc., a Delaware corporation.
Subject to the supervision and direction of RBB's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objective and policies, makes investment decisions for the Fund, places orders to purchase and sell securities, and employs professional portfolio managers and securities analysts who provide research services to the Fund. For its services to the Fund, the Adviser is paid a monthly advisory fee computed at an annual rate of 1.25% of the Fund's average daily net assets. The Adviser has notified RBB, however, that it intends to waive a portion of its advisory fees during the current fiscal year.
Portfolio Management
The day-to-day portfolio management of the Fund is the responsibility of David M. Dabora and Wayne J. Archambo who are portfolio managers of the Adviser. Prior to taking on day to day responsibilities for the Micro Cap Value Fund, Mr. Dabora was an assistant portfolio manager/analyst of the premium equity product of the Adviser, an all-cap value institutional product. Before joining the Adviser in April 1995, Mr. Dabora had been employed by The Boston Company Asset Management, Inc. since 1991 as a senior equity analyst. Mr. Dabora has over 11 years of investment experience and is a Chartered Financial Analyst. Mr. Archambo oversees the investment activities of the Adviser's $____ million of mid-capitalization value equity product, including the $___ million Mid Cap Value Fund and small-capitalization value institutional equity assets under management worth approximately $____ billion. Prior to joining the Adviser in April 1995, Mr. Archambo had been employed by The Boston Company Asset Management, Inc. since 1989 as a senior portfolio manager and a member of that
firm's Equity Policy Committee. Mr. Archambo has over 16 years of investment experience and is a Chartered Financial Analyst.
Administrator
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. For its services, PFPC receives a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis.
Administrative Services Agent
Provident Distributors, Inc. ("PDI") provides certain administrative services to the Fund's Institutional Shares not otherwise provided by PFPC. PDI's principal business address is Four Falls Corporate Center, West Conshohocken, Pennsylvania 19428. PDI furnishes certain internal quasi-legal, executive and administrative services to the Fund, acts as a liaison between the Fund and its various service providers and coordinates and assists in the preparation of reports prepared on behalf of the Fund. For its services, PDI is entitled to a monthly fee calculated at the annual rate of .15% of the respective average daily net assets of the Fund's Institutional Class. PDI is currently waiving fees in excess of .03% of the average daily net assets of the Fund's Institutional Class.
Distributor
PDI acts as distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank, National Association ("PNC Bank") serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. The principal offices of PFPC, an indirect, wholly-owned subsidiary of PNC Bank, are located at 400 Bellevue Parkway, Wilmington, Delaware 19809.
Expenses
The expenses of the Fund are deducted from its total income before dividends are paid. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios. The Institutional Class of the Fund pays its own distribution fees, if any, and may pay a different share of other expenses than other classes (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by the Institutional Class or if it receives different services.
The Adviser may assume expenses of the Fund from time to time. To the extent any service providers assume expenses of the Fund, such assumption of expenses will have the effect of lowering the Fund's overall expense ratio and increasing its yield to investors.
HOW TO PURCHASE SHARES
General
Shares representing interests in the Fund are offered continuously for sale by the Distributor. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application to the Fund's transfer agent, PFPC. Purchases of Shares may be effected by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Boston Partners Micro Cap Value Fund," c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. The name of the Fund, Boston Partners Micro Cap Value Fund, must also appear on the check or Federal Reserve Draft. Shareholders may not purchase shares of the Boston Partners Micro Cap Value Fund with a check issued by a third party and endorsed over to the Fund. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $100,000 and subsequent investments must be at least $5,000. For purposes of meeting the minimum initial purchase, clients which are part of endowments, foundation or other related groups may be aggregated. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order. As of the date of this Prospectus, the Fund intends to suspend the offering of Shares upon the Fund's attaining $300 million in total assets.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange, Inc. (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased initially or acquired through the exercise of any exchange privilege is based on the net asset value next computed after a purchase order is received by the Fund or its agents prior to the close of the NYSE on such day (generally 4:00 p.m. Eastern Time). Orders received by the Fund or its agents after the close of the NYSE are priced at the net asset value next determined on the following Business Day. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
Shares may be purchased and subsequent investments may be made by principals and employees of the Adviser, and by their spouses and children, either directly or through their individual retirement accounts, and by any pension and profit-sharing plan of the Adviser, without being subject to the minimum investment limitations.
An investor may also purchase Shares by having his bank or his broker wire Federal Funds to PFPC. An investor's bank or broker may impose a charge for this service. The Fund does not currently impose a service charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 261-4073, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-1108-2507
FROM: (name of investor)
ACCOUNT NUMBER: (Investor's account number with the Fund) FOR PURCHASE OF: (name of the Fund) AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process purchases until it receives a fully completed and signed application.
For subsequent investments, an investor should follow steps A and B above.
Automatic Investing
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account. Investors desiring to participate in the automatic investing program should call the Fund's transfer agent, PFPC, at (888) 261-4073 to obtain the appropriate forms.
HOW TO REDEEM AND EXCHANGE SHARES
Redemption by Mail
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Boston Partners Micro Cap Value Fund, c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. There is no charge for a redemption, unless the Shareholder has held his or her Shares for less than one year, upon which a fee equal to 1% of the net asset value of the Shares redeemed at the time of redemption will be imposed.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Transaction Fee Imposed on Certain Redemptions
The Fund requires the payment of a transaction fee on redemptions of Shares of the Fund held for less than one year equal to 1.00% of the net asset value of such Shares redeemed at the time of redemption. This additional transaction fee is paid to the Fund, not to the adviser,
distributor or transfer agent. It is not a sales charge or a contingent deferred sales charge. The purpose of the additional transaction fee is to indirectly allocate transaction costs associated with redemptions to those investors making redemptions after holding their shares for a short period, thus protecting existing shareholders. These costs include: (1) brokerage costs; (2) market impact costs -- i.e., the decrease in market prices which may result when the Fund sells certain securities in order to raise cash to meet the redemption request; (3) the realization of capital gains by the other shareholders in the Fund; and (4) the effect of the "bid-ask" spread in the over-the-counter market. The 1.00% amount represents the Fund's estimate of the brokerage and other transaction costs which may be incurred by the Fund in disposing of stocks in which the Fund may invest. Without the additional transaction fee, the Fund would generally be selling its shares at a price less than the cost to the Fund of acquiring the portfolio securities necessary to maintain its investment characteristics, resulting in reduced investment performance for all shareholders in the Fund. With the additional transaction fee, the transaction costs of selling additional stocks are not borne by all existing shareholders, but the source of funds for these costs is the transaction fee paid by those investors making redemptions.
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
With the exception of redemptions to which the 1.00% transaction fee applies, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. For redemptions to which the additional transaction fee applies, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents, less an amount equal to 1.00% of the net asset value of such Shares redeemed that the shareholder has held for less than one year. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents 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 1940 Act. 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 purchase date, pending a determination that the check has cleared. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that a portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
Exchange Privilege
The exchange privilege is available to shareholders residing in any state in which the Shares being acquired may be legally sold. A shareholder may exchange Shares of the Fund for Institutional Shares of any other Boston Partners Fund of RBB, subject to the restrictions described under "Exchange Privilege Limitations." Such exchange will be effected at the net asset value of the exchanged Fund and the net asset value of the Fund being acquired next determined after receipt of a request for an exchange by the Fund or its agents. An exchange of Shares will be treated as a sale for federal income tax purposes. See "Taxes." A shareholder wishing to make an exchange may do so by sending a written request to PFPC.
If the exchanging shareholder does not currently own Institutional Shares of the Boston Partners Fund into which he would like to exchange, a new account will be established with the same registration, dividend and capital gain options as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted. The exchange privilege may be modified or terminated at any time, or from time to time, by RBB, upon 60 days' written notice to shareholders.
If an exchange is to a new account in the acquired Fund, the dollar value of Institutional Shares acquired must equal or exceed that Fund's minimum for a new account; if to an existing account, the dollar value must equal or exceed that Fund's minimum for subsequent investments. If any amount remains in the Fund from which the exchange is being made, such amount must not drop below the minimum account value required by the Fund.
Exchange Privilege Limitations
The Fund's exchange privilege is not intended to afford shareholders a way to speculate on short-term movements in the market. Accordingly, in order to prevent excessive use of the exchange privilege that may potentially disrupt the management of the Fund and increase transaction costs, the Fund has established a policy of limiting excessive exchange activity.
Shareholders are entitled to six (6) exchange redemptions (at least 30 days apart) from the Fund during any twelve-month period. Notwithstanding these limitations, the Fund reserves the right to reject any purchase request (including purchases by exchange) that is deemed to be disruptive to efficient portfolio management.
Telephone Transactions
In order to request a telephone exchange or redemption, a shareholder must have completed and returned an account application containing a telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the exchange or redemption by calling (888) 261-4073. Neither RBB, the Fund, the Distributor, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures: (1) requiring the appropriate telephone transaction privilege forms; (2) requiring the caller to provide the names of the account owners, the account social security number and name of the Fund, all of which must match RBB's records; (3) requiring RBB's service representative to complete a telephone transaction form, listing all of the above caller identification information; (4) permitting exchanges only if the two account registrations are identical; (5) requiring that redemption proceeds be sent only by check to the account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (6) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) Business Days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Fund elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than the Distributor), financial institutions, securities dealers, financial planners and other industry professionals, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by an attorney-in-fact under a power of attorney.
NET ASSET VALUE
The net asset values for each class of a fund are calculated by adding the value of the proportionate interest of the class in a fund's cash, securities and other assets, deducting actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class are calculated independently of each other class. The net asset values are calculated as of the close of regular trading on the NYSE, generally 4:00 p.m. Eastern Time on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported
sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of the RBB'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.
With the approval of RBB's Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually and will pay them in the calendar year in which they are declared, generally in December. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
TAXES
The following discussion is only a brief summary of some of the important tax considerations generally affecting the 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. 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) 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, whether such gain was reflected in the price paid for the Shares, or whether such gain was attributable to bonds bearing
tax-exempt interest. All other distributions, to the extent they are taxable, are taxed to shareholders as ordinary income.
RBB will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in 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 shares just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received, although the distribution is, in effect, a return of capital.
Shareholders who exchange shares representing interests in one Fund for shares representing interests in another Fund will generally recognize capital gain or loss for federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. Federal income tax treatment and should consult their tax advisers.
MULTI-CLASS STRUCTURE
The Fund offers one other class of shares, Investor Shares, which is offered directly to individual investors pursuant to a separate prospectus. Shares of each class represent equal pro rata interests in the Fund and accrue dividends and calculate net asset value and performance quotations in the same manner. The Fund will quote performance of the Investor Shares separately from Institutional Shares. Because of different expenses paid by the Institutional Shares, the total return on such shares can be expected, at any time, to be different than the total return on Investor Shares. Information concerning other classes may be obtained by calling the Fund at (800) 311-9783 or 9829.
DESCRIPTION OF SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ______ billion shares are currently classified into __ different classes of Common Stock. See "Description of Shares" in the Statement of Additional Information."
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO BOSTON PARTNERS MICRO CAP VALUE FUND AND DESCRIBE
ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO BOSTON PARTNERS MICRO CAP VALUE 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, even where a share has a different class designation than another share representing an interest in the Fund. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB 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, RBB will assist in shareholder 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. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of _______, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
OTHER INFORMATION
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC Inc., the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (888) 261-4073.
Share Certificates
In the interest of economy and convenience, physical certificates representing Shares in the Fund are not normally issued.
Future 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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Russell 2000 Index. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as Business Week, Fortune, Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
[THIS PAGE INTENTIONALLY LEFT BLANK]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'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 RBB OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Table of Contents
Page
----
INTRODUCTION...................................... 4
INVESTMENT OBJECTIVES AND POLICIES................ 4
INVESTMENT LIMITATIONS............................ 7
RISK FACTORS...................................... 8
MANAGEMENT........................................ 8
HOW TO PURCHASE SHARES............................ 11
HOW TO REDEEM AND EXCHANGE SHARES................. 13
NET ASSET VALUE................................... 17
DIVIDENDS AND DISTRIBUTIONS....................... 18
TAXES............................................. 18
MULTI-CLASS STRUCTURE............................. 20
DESCRIPTION OF SHARES............................. 20
OTHER INFORMATION................................. 21
Investment Adviser
Boston Partners Asset Management, L.P.
Boston, Massachusetts
Custodian
PNC Bank, N.A.
Philadelphia, Pennsylvania
Transfer Agent and Administrator
PFPC Inc.
Wilmington, Delaware
Distributor
Provident Distributors, Inc.
Conshohocken, Pennsylvania
Counsel
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
|
Independent Accountants
PROSPECTUS
___________, 1998
BOSTON PARTNERS
MICRO CAP
VALUE FUND
(Institutional Shares)
bp
BOSTON PARTNERS ASSET MANAGEMENT, L.P.
Boston Partners Micro Cap Value Fund bp
(Institutional Class) BOSTON PARTNERS ASSET MANAGEMENT, L.P.
ACCOUNT APPLICATION
Please Note: Do not use this form to open a retirement plan account. For an IRA
application or help with this Application, please call 1-888-261-4073
+--------------+ (Please check the appropriate box(es) below.)
| 1 | |_| Individual |_| Joint Tenant |_| Other
| Account |
| Registration:| Name SOCIAL SECURITY NUMBER OR TAX ID # OF PRIMARY OWNER
+--------------+
NAME OF JOINT OWNER JOINT OWNER SOCIAL SECURITY NUMBER OR TAX ID #
For joint accounts, the account registrants will be joint tenants with right of
survivorship and not tenants in common unless tenants in common or community property
registrations are requested.
GIFT TO MINOR: |_| Uniform Gifts/Transfer to Minor's Act
NAME OF ADULT CUSTODIAN (ONLY ONE PERMITTED)
NAME OF MINOR (ONLY ONE PERMITTED)
MINOR'S SOCIAL SECURITY NUMBER AND DATE OF BIRTH
CORPORATION,
PARTNERSHIP, TRUST
OR OTHER ENTITY:
NAME OF CORPORATION, PARTNERSHIP, OR OTHER NAME(S) OF TRUSTEE(S)
TAXPAYER IDENTIFICATION NUMBER
+--------------+
| 2 | STREET OR P.O. BOX AND/OR APARTMENT NUMBER
| Mailing |
| Address: |
+--------------+ CITY STATE ZIP CODE
DAY PHONE NUMBER EVENING PHONE NUMBER
+--------------+ Minimum initial investment of $100,000 Amount of investment $____________
| 3 |
| Investment | Make the check payable to Boston Partners Micro Cap Value Fund.
| Information: |
+--------------+ Shareholders may not purchase shares of this Fund with a check
issued by a third party and endorsed over to the Fund.
DISTRIBUTION Note: Dividends and capital gains may be reinvested or paid by check. If no options are selected
OPTIONS: below, both dividends and capital gains will be reinvested in additional Fund shares.
Dividends |_| Pay by check |_| Reinvest |_| Capital Gains |_| Pay by check |_| Reinvest |_|
+--------------+ To use this option, you must initial the appropriate line below.
| 4 | I authorize the Transfer Agent to accept instructions from any persons to redeem or exchange shares in
| Telephone | my account(s) by telephone in accordance with the procedures and conditions set forth in the Fund's
| Redemption: | current prospectus.
+--------------+
|
Redeem shares, and send the proceeds
individual initial joint initial to the address of record.
Exchange shares for shares of The Boston
individual initial joint initial Partners Large Cap Value Fund, Mid Cap
Value Fund, Bond Fund, Market Neutral
Fund or Long-Short Equity Fund.
+--------------+ The Account Investment Plan which is available to shareholders of the Fund,
| 5 | makes possible regularly scheduled purchases of Fund shares to allow
| Automatic | dollar-cost averaging. The Fund's Transfer Agent can arrange for an amount
| Investment | of money selected by you to be deducted from your checking account and used
| Plan: | to purchase shares of the Fund.
+--------------+
Please debit $________ from my checking account (named below) on or about the
20th of the month. Please attach an unsigned, voided check.
|_| Monthly |_| Every Alternate Month |_| Quarterly |_| Other
BANK OF RECORD: BANK NAME STREET ADDRESS OR P.O. BOX
CITY STATE ZIP CODE
BANK ABA NUMBER BANK ACCOUNT NUMBER
+--------------+ The undersigned warrants that I (we) have full authority and, if a natural person, I (we) am (are) of
| 6 | legal age to purchase shares pursuant to this Account Application, and I (we) have received a current
| | prospectus for the Fund in which I (we) am (are) investing.
| Signatures: |
+--------------+ Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is required
to have the following certification:
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service that I am subject to 31%
backup withholding as a result of a failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to backup withholding.
Note: You must cross out item (2) above if you have been notified by the IRS that you are
currently subject to backup withholding because you have failed to report all interest and
dividends on your tax return. The Internal Revenue Service does not require your consent to
any provision of this document other than the certification required to audit backup
withholding.
SIGNATURE OF APPLICANT DATE
PRINT NAME TITLE (IF APPLICABLE)
SIGNATURE OF JOINT OWNER DATE
PRINT NAME TITLE (IF APPLICABLE)
(If you are signing for a corporation, you must indicate corporate office or title. If you
wish additional signatories on the account, please include a corporate resolution. If signing
as a fiduciary, you must indicate capacity.)
For information on additional options, such as IRA Applications, rollover requests for
qualified retirement plans, or for wire instructions, please call us at 1-888-261-4073.
Mail completed Account Application and check to: The Boston Partners Micro Cap Value Fund
c/o PFPC Inc.
P.O. Box 8852
Wilmington, DE 19899-8852
|
BOSTON PARTNERS MICRO CAP VALUE FUND
(Investor Shares)
of
The RBB Fund, Inc.
Boston Partners Micro Cap Value Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares of the Investor Class ("Shares") offered by this Prospectus represent interests in the Fund. The Fund is a diversified fund that seeks long-term growth of capital, with current income as a secondary objective, primarily through equity investments, such as common stocks. It seeks to achieve its objectives by investing at least 65% of its total assets in a diversified portfolio consisting of equity securities of issuers with market capitalizations that do not exceed $500 million when purchased by the Fund, and identified by Boston Partners Asset Management, L.P. (the "Adviser") as equity securities that it believes possess value characteristics. The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
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 and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund by calling (800) 311-9783 or 9829. The Prospectus and the Statement of Additional Information are available for reference, along with other related materials, on the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS _____________, 1998
EXPENSE TABLE
The following table illustrates the shareholder transaction and annual operating expenses incurred by Investor Shares of the Fund (after fee waivers and expense reimbursements) for the fiscal period ended August 31, 1998, as a percentage of average daily net assets. An example based on the summary is also shown.
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases.........................None
Maximum Sales Charge Imposed on Reinvested Dividends..............None
Maximum Deferred Sales Charge.....................................None
Redemption Fee1..................................................1.00%
Exchange Fee......................................................None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees (after waivers)2.................................____%
12b-1 Fees (after waivers)2......................................____%
Other Expenses (after expense reimbursements)2...................____%
Total Fund Operating Expenses (after waivers and
expense reimbursements)2................................====%
|
1 To prevent the Fund from being adversely affected by the transaction costs associated with short-term shareholder transactions, the Fund will redeem shares at a price equal to the net asset value of the shares, less an additional transaction fee equal to 1.00% of the net asset value of all such shares redeemed that have been held for less than one year. Such fees are not sales charges or contingent deferred sales charges, but are retained by the Fund for the benefit of all shareholders.
2 In the absence of fee waivers and expense reimbursements, Management Fees would be 1.25%, Other Expenses would be ______%, 12b-1 Fees would be 0.25% and Total Fund Operating Expenses would be _______%. Management Fees and 12b-1 Fees are each based on average daily net assets and are calculated daily and paid monthly.
Example
An investor would pay the following expenses on a $1,000 investment in the Fund, assuming (1) a 5% annual return and (2) redemption at the end of each time period (including the 1.00% transaction fee on redemptions made within a year of purchase):
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
Boston Partners Micro Cap Value Fund $ $ $ $
|
The 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 the various costs and expenses, see "Management" and "Distribution of Shares" below.) The Fee Table reflects expense reimbursements and voluntary waivers of Management Fees and 12b-1 fees for the Fund, which are expected to be in effect during the current fiscal year. However, the Adviser, the Distributor and the Fund's other service providers are under no obligation with respect to such expense reimbursements and waivers and there can be no assurance that any future expense reimbursements and waivers of Management Fees or 12b-1 Fees will not vary from the figures reflected in the Fee Table.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The "Financial Highlights" presented below set forth certain investment results for shares of the Investor Class of the Fund for the period July __, 1998 (date of inception) through August 31, 1998. The financial data included in this table should be read in conjunction with the financial statements and notes thereto and the unqualified report of _________________________________, RBB's independent accountant, which are incorporated by reference into the Statement of Additional Information. Further information about the performance of the Investor Class of the Fund is available in the Annual Report to Shareholders. Both the Statement of Additional Information and the Annual Report to Shareholders may be obtained from the Fund free of charge by calling the telephone number on page 1 of the prospectus.
BOSTON PARTNERS MICRO CAP VALUE FUND
(For an Investor Share outstanding throughout each period)
Per Share Operating Performance**
Net asset value, beginning of period.......................
Net investment income (1)..................................
Net realized and unrealized gain on investments(2).........
Net increase in net assets resulting
from operations............................................
Net asset value, end of period.............................
Total investment return(3).................................
Ratios/Supplemental Data
Net assets, end of period (000)............................
Ratio of expenses to average net
assets***(1)(4)..........................................
Ratio of net investment income to
average net assets***(1).................................
Portfolio turnover rate****................................
Average commission rate per share(5).......................
(4) Without the waiver of advisory, 12b-1, administration and transfer
agent fees and without the reimbursement of certain operating expenses,
the ratio of expenses to average net assets annualized for the period
ended August 31, 1998 would have been ____% for the Investor Class.
(5) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period subject to such
commissions.
RBB is an open-end management investment company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interests in the Boston Partners Micro Cap Value Fund. RBB was incorporated in Maryland on February 29, 1988.
The Fund's investment objective is to provide long-term growth of capital, with current income as a secondary objective, primarily through equity investments, such as common stocks. The Fund seeks to achieve its objective by investing, under normal market conditions, at least 65% of its total assets in a diversified portfolio consisting primarily of equity securities of issuers with market capitalizations that do not exceed $500 million when purchased by the Fund, and identified by the Adviser as equity securities that it believes possess value characteristics.
The Fund generally invests in the equity securities of small companies. The Adviser will seek to invest in companies it considers to be well managed and to have attractive fundamental financial characteristics. The Adviser believes greater potential for price appreciation exists among small companies since they tend to be less widely followed by other securities analysts and thus may be more likely to be undervalued by the market. The Fund may invest from time to time a portion of its assets, not to exceed 35% (under normal conditions) at the time of purchase, in companies with considerably larger market capitalizations.
The Fund presents greater risks than funds that invest in equity securities of larger companies for the following reasons: Companies in which the Fund primarily invests will include those that have limited product lines, markets, or financial resources, or are dependent upon a small management group. In addition, because these stocks are not well known to the investing public, do not have significant institutional ownership, and are followed by relatively few securities analysts, there will normally be less publicly available information concerning these securities compared to what is available for the securities of larger companies. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, can decrease the value and liquidity of securities held by the Fund. Historically, small capitalization stocks have been more volatile in price than larger capitalization stocks. Among the reasons for the greater price volatility of these small company stocks are the less certain growth prospects of smaller firms, the lower degree of liquidity in the markets for such stocks, the greater sensitivity of small companies to changing economic conditions, the fewer market makers and the wider spreads between quoted bid and asked prices which exist in the over-the-counter market for such stocks. Besides exhibiting greater volatility, small company stocks may, to a degree, fluctuate independently of larger company stocks. Small company stocks may decline in price as large company stocks rise, or rise in price as large company stocks decline. Investors should therefore expect that the Fund will be more volatile than, and may fluctuate independently of, broad stock market indices such as the Standard & Poor's 500 Composite Stock Price Index.
The securities in which the Fund invests will often be traded only in the over-the-counter market or on a regional securities exchange, may be listed only in the quotation service commonly known as the "pink sheets," and may not be traded every day or in the volume typical of trading on a national securities exchange. They may be subject to wide fluctuations in market value. The trading market for any given security may be sufficiently thin as to make it difficult for the Fund to dispose of a substantial block of such securities. The disposition by the Fund of portfolio securities to meet redemptions or otherwise may require the Fund to sell these securities at a discount from market prices or during periods when, in the Adviser's judgment, such disposition is not desirable or to make many small sales over a lengthy period of time.
The Adviser examines various factors in determining the value characteristics of such issuers, including, but not limited to, price to book value ratios and price to earnings ratios. These value characteristics are examined in the context of the issuer's operating and financial fundamentals such as return on equity, earnings growth and cash flow.
The Adviser selects securities for the Fund based on a fundamental analysis of industries and companies, earning power and growth and other investment criteria. In general, the Fund's investments are broadly diversified over a number of industries and, as a matter of policy, the Fund will not invest 25% or more of its total assets in any one industry.
The Fund may invest up to 25% of its total assets in securities of foreign issuers, including American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs"). Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operating in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. 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 assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. ADRs and EDRs are receipts issued by a U.S. bank or trust company evidencing ownership of underlying securities issued by a foreign issuer. ADRs and EDRs may be listed on a national securities exchange or may trade in the over-the-counter market. ADR and EDR prices are denominated in U.S. dollars, even though the underlying security may be denominated in a foreign currency. The underlying security may be subject to foreign government taxes which would reduce the yield on such securities. Investments in such instruments involve risks similar to those of investing directly in foreign securities. See "Investment Objectives and Policies--Foreign Securities" in the Statement of Additional Information.
The Fund may invest the remainder of its total assets in derivative securities; debt securities issued by U.S. banks, corporations and other business organizations that are investment grade securities; and debt securities issued by the U.S. government or government agencies.
In accordance with the above-mentioned policies, the Fund may also invest in indexed securities, repurchase agreements, reverse repurchase agreements, dollar rolls, financial futures contracts, options on futures contracts and may lend portfolio securities. See "Investment Objectives and Policies" in the Statement of Additional Information.
The Fund may invest in registered investment companies and investment funds in foreign countries subject to the provisions of the Investment Company Act of 1940, as amended (the "1940 Act"), and as discussed in "Investment Objectives and Policies" in the Statement of Additional Information. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
While the Adviser intends to fully invest the Fund's assets at all times in accordance with the above-mentioned policies, the Fund reserves the right to hold up to 100% of its assets, as a temporary defensive measure, in cash and eligible U.S. dollar-denominated money market instruments. The Adviser would determine when market conditions warrant temporary defensive measures.
The Fund's investment objective and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in the Fund.
The Fund may not change the following investment limitations without shareholder approval. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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.
If a percentage restriction under one of the Fund's investment policies or restrictions or the use of assets is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
The Fund presently has no intention to participate as a purchaser in any initial public offering of securities that may trade at a premium in the secondary market when such a secondary market exists, although it reserves the ability to participate in such offerings in the future.
Portfolio Turnover
The Fund retains the right to sell securities irrespective of how long they have been held. The Adviser estimates that the annual turnover in the Fund will not exceed 150% during the current fiscal year. Such a relatively high portfolio turnover will be accompanied by relatively high transactional (i.e., brokerage) costs. It may also result in increased capital gains realized by the Fund and distributed to shareholders.
As with other mutual funds, there can be no assurance that the Fund will achieve its objective. The net asset value per share of Shares representing an interest in the Fund will fluctuate as the values of its portfolio securities change in response to changing conditions in the equity market. An investment in the Fund is not intended to constitute a balanced investment program. As of the date of this Prospectus, U.S. stock markets were trading at or close to record high levels and there can be no guarantee that such levels will continue. Other risk factors are discussed above under "Investment Objectives and Policies" and in the Statement of Additional Information under "Investment Objectives and Policies."
European Currency Unification. Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be
irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Fund may invest and may result in the Fund facing additional risks in pursuing its investment objective. These risks, which include, but are not limited to, uncertainty as to the proper tax treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of the Fund's net asset value per share.
Year 2000. The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The capability of these systems to recognize the year 2000 could have a negative impact on the Adviser's provision of investment advisory services, including the handling of securities trades pricing. Both the Adviser and PFPC have advised RBB that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that given the extensive testing which they are undertaking, their systems will be year 2000 compliant before such date. There can, however, be no assurance that the Adviser or any other service provider will be successful in achieving year 2000 compliance, or that interaction with other non-complying computer systems will not impair services to the Fund at that time.
General. Investment methods described in this Prospectus are among those which the Fund has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
Board of Directors
The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors.
Investment Adviser
Boston Partners Asset Management, L.P., located at 28 State Street, 21st Floor, Boston, Massachusetts 02109, serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other institutional accounts that had aggregate total assets under management as of ________, 1998, in excess of $__ billion. The adviser is organized as a Delaware limited partnership whose sole general partner is Boston Partners, Inc., a Delaware corporation.
Subject to the supervision and direction of RBB's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objective and policies, makes investment decisions for the Fund, places orders to purchase and sell securities, and employs professional portfolio managers and securities analysts who provide research services to the Fund. For its services to the Fund, the Adviser is paid a monthly advisory fee computed at an annual rate of 1.25% of the Fund's average daily net assets. The Adviser has notified RBB, however, that it intends to waive [a portion of its] advisory fees during the current fiscal year.
Portfolio Management
The day-to-day portfolio management of the Fund is the responsibility of David M. Dabora and Wayne J. Archambo who are portfolio managers of the Adviser. Prior to taking on day to day responsibilities for the Micro Cap Value Fund, Mr. Dabora was an assistant portfolio manager/analyst of the premium equity product of the Adviser, an all-cap value institutional product. Before joining the Adviser in April 1995, Mr. Dabora had been employed by The Boston Company Asset Management, Inc. since 1991 as a senior equity analyst. Mr. Dabora has over 11 years of investment experience and is a Chartered Financial Analyst. Mr. Archambo oversees the investment activities of the Adviser's $___ million of mid-capitalization value equity product, including the $__ million Mid Cap Value Fund and small capitalization value institutional equity assets under management worth approximately $___ billion. Prior to joining the Adviser in April 1995, Mr. Archambo had been employed by The Boston Company Asset Management, Inc. since 1989 as a senior portfolio manager and a member of that firm's Equity Policy Committee. Mr. Archambo has over 16 years of investment experience and is a Chartered Financial Analyst.
Administrator
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. For its services, PFPC receives a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis.
Distributor
Provident Distributors, Inc. ("PDI"), with a principal business address at Four Falls Corporate Center, West Conshohocken, Pennsylvania 19428, acts as distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank, National Association ("PNC Bank") serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. The principal offices of PFPC, an indirect, wholly-owned subsidiary of PNC Bank, are located at 400 Bellevue Parkway, Wilmington, Delaware 19809. PFPC may enter into shareholder servicing agreements with registered broker-dealers who have entered into dealer agreements, with the Distributor ("Authorized Dealers") for the provision of certain shareholder support services to customers of such Authorized Dealers who are shareholders of the Fund. The services provided and the fees payable by the Fund for these services are described in the Statement of Additional Information under "Investment Advisory, Distribution and Servicing Arrangements."
Expenses
The expenses of the Fund are deducted from its total income before dividends are paid. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios. The Investor Class of the Fund pays its own distribution fees, and may pay a different share than the Institutional Class of other expenses (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by the Investor Class or if it receives different services.
The Adviser may assume expenses of the Fund from time to time. To the extent any service providers assume expenses of the Fund, such assumption of expenses will have the effect of lowering the Fund's overall expense ratio and increasing its yield to investors.
The Board of Directors of RBB has approved and adopted a Distribution Agreement and Plan of Distribution for the Shares (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor is entitled to receive from the Fund a distribution fee with respect to the Shares, which is accrued daily and paid monthly, of up to 0.25% on an annualized basis of the average daily net assets of the Shares. The actual amount of such compensation under the Plan is agreed upon by RBB's Board of Directors and by the Distributor. The Distributor may, in its discretion, from time to time waive voluntarily all or any portion of its distribution fee. The Distributor intends to waive all fees under the Plan during the current fiscal year.
Amounts paid to the Distributor under the Plan may be used by the
Distributor to cover expenses that are related to (i) the sale of the Shares,
(ii) ongoing servicing and/or maintenance of the accounts of Shareholders, and
(iii) sub-transfer agency services, subaccounting services or administrative
services related to the sale of the Shares, all as set forth in the Fund's 12b-1
Plan. The Distributor may delegate some or all of these functions to Service
Agents. See "How to Purchase Shares - Purchases Through Intermediaries."
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Shares the fee agreed to under the Distribution Agreement. Payments under the Plan are not tied exclusively to expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
Purchases Through Intermediaries
Shares of the Fund may be available through certain brokerage firms, financial institutions and other industry professionals (collectively, "Service Organizations"). Certain features of the Shares, such as the initial and subsequent investment minimums and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose transaction or administrative charges or other direct fees, which charges and fees would not be imposed if Shares are purchased directly from the Fund. Therefore, a client or customer should contact the Service Organization acting on his behalf concerning the fees (if any) charged in connection with a purchase or redemption of Shares and should read this Prospectus in light of the terms governing his accounts with the Service Organization. Service Organizations will be responsible for promptly transmitting client or customer purchase and redemption orders to the Fund in accordance with their agreements with the Fund and with clients or customers. Service Organizations 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 Organization 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 Organization, or, if applicable, its authorized designee, accepts a purchase or redemption order in good order. Orders received by the Fund in good order will be priced at the Fund's net asset value next computed after they are accepted by the Service Organization or its authorized designee.
For administration, subaccounting, transfer agency and/or other services, Boston Partners, the Distributor or their affiliates may pay Service Organizations and certain recordkeeping organizations a fee of up to .35% (the "Service Fee") of the average annual value of accounts with the Fund maintained by such Service Organizations or recordkeepers. The Service Fee payable to any one Service Organization is determined based upon a number of factors, including the nature and quality of services provided, the operations processing requirements of the relationship and the standardized fee schedule of the Service Organization or recordkeeper.
The Adviser, the Distributor or either of their affiliates may, at their own expense, provide promotional incentives for qualified recipients who support the sale of Shares, consisting of securities dealers who have sold 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 one or more Boston Partners Funds. Travel, meals and lodging may also be paid 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 Shares.
General
Shares representing interests in the Fund are offered continuously for sale by the Distributor and may be purchased without imposition of a sales charge. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application to the Fund's transfer agent, PFPC. Purchases of Shares may be effected by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Boston Partners Micro Cap Value Fund," c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. The name of the Fund, Boston Partners Micro Cap Value Fund, must also appear on the check or Federal Reserve Draft. Shareholders may not purchase shares of the Boston Partners Micro Cap Value Fund with a check issued by a third party and endorsed over to the Fund. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $2,500 and subsequent investments must be at least $100. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order. As of the date of this Prospectus, the Fund intends to suspend the offering of Shares upon the Fund's attaining $300 million in total assets.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange, Inc. (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased initially or acquired through the exercise of an exchange privilege is based on the net asset value next computed after a purchase order is received by the Fund or its agents prior to the close of the NYSE on such day (generally 4:00 p.m. Eastern Time). Orders received by the Fund or its agents after the close of the NYSE are priced at the net asset value next determined on the following Business Day. In those cases where an
investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
Provided that the investment is at least $2,500, An investor may also purchase Shares by having his bank or his broker wire Federal Funds to PFPC. An investor's bank or broker may impose a charge for this service. The Fund does not currently impose a service charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 261-4073, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-1108-2507
FROM: (name of investor)
ACCOUNT NUMBER: (Investor's account number with the Fund)
FOR PURCHASE OF: Boston Partners Micro Cap Value
Fund
AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process purchases until it receives a fully completed and signed application.
For subsequent investments, an investor should follow steps A and B above.
Automatic Investing
Additional investments in Shares may be made automatically by authorizing the Fund's transfer agent to withdraw funds from your bank account. Investors desiring to participate in the automatic Investing Program should call the Fund's transfer agent, PFPC, at (888) 261-4073 to obtain the appropriate forms.
Retirement Plans
Shares may be purchased in conjunction with individual retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian. For further information as to applications and annual fees, contact the Fund's transfer agent, PFPC, at (888) 261-4073. To determine whether the benefits of an IRA are available and/or appropriate, a shareholder should consult with a tax adviser.
Redemption by Mail
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Boston Partners Micro Cap Value Fund, c/o PFPC Inc., P.O. Box 8852, Wilmington, Delaware 19899-8852. There is no charge for a redemption, unless the Shareholder has held his or her Shares for less than one year, upon which a fee equal to 1% of the net asset value of the Shares redeemed at the time of redemption will be imposed.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary. In the case of shareholders holding share certificates, the certificates for the shares being redeemed must accompany the redemption request. Additional documentary evidence of authority is also required by the Fund's transfer agent in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator.
Systematic Withdrawal Plan
If your account has a value of at least $10,000, you may establish a Systematic Withdrawal Plan and receive regular periodic payments. A request to establish a Systematic Withdrawal Plan must be submitted in writing to PFPC at P.O. Box 8852, Wilmington, Delaware 19899-8852. Each withdrawal redemption will be processed on or about the 25th of the month and mailed as soon as possible thereafter. There are no service charges for maintenance; the minimum amount that you may withdraw each period is $100. (This is merely the minimum amount allowed and should not be mistaken for a recommended amount.) The holder of a Systematic Withdrawal Plan will have any income dividends and any capital gains distributions reinvested in full and fractional shares at net asset value. To provide funds for payment, Shares will be redeemed in such amount as is necessary at the redemption price, which is net asset value next determined after the Fund's receipt of a redemption request. Redemption of Shares may reduce or possibly exhaust the Shares in your account, particularly in the event of a market decline. As with other redemptions, a redemption to make a withdrawal payment is a sale for federal income tax purposes. Payments made pursuant to a Systematic Withdrawal Plan cannot be considered as actual yield or income since part of such payments may be a return of capital.
You will ordinarily not be allowed to make additional investments of less than the aggregate annual withdrawals under the Systematic Withdrawal Plan during the time you have the plan in effect and, while a Systematic Withdrawal Plan is in effect, you may not make periodic investments under the Automatic Investment Plan. You will receive a confirmation of each transaction showing the sources of the payment and the Share and cash balance remaining in your plan. The plan may be terminated on written notice by the shareholder or by the Fund and will terminate automatically if all Shares are liquidated or withdrawn from the account or upon the death or incapacity of the shareholder. You may change the amount and schedule of withdrawal payments or suspend such payments by giving written notice to the Fund's transfer agent at least seven Business Days prior to the end of the month preceding a scheduled payment.
Transaction Fee Imposed on Certain Redemptions
The Fund requires the payment of a transaction fee on redemptions of Shares of the Fund held for less than one year equal to 1.00% of the net asset value of such Shares redeemed at the time of redemption. This additional transaction fee is paid to the Fund, not to the adviser, distributor or transfer agent. It is not a sales charge or a contingent deferred sales charge. The purpose of the additional transaction fee is to indirectly allocate transaction costs associated with redemptions to those investors making redemptions after holding their shares for a short period, thus protecting existing shareholders. These costs include: (1) brokerage costs; (2) market impact costs -- i.e., the decrease in market prices which may result when the Fund sells certain securities in order to raise cash to meet the redemption request; (3) the realization of capital gains by the other shareholders in the Fund; and (4) the effect of the "bid-ask" spread in the over-the-counter market. The 1.00% amount represents the Fund's estimate of the brokerage and other transaction costs which may be incurred by the Fund in disposing of stocks in which the Fund may invest. Without the additional transaction fee, the Fund would generally be selling its shares at a price less than the cost to the Fund of acquiring the portfolio securities necessary to maintain its investment characteristics, resulting in reduced investment performance for all shareholders in the Fund. With the additional transaction fee, the transaction costs of selling additional stocks are not borne by all existing shareholders, but the source of funds for these costs is the transaction fee paid by those investors making redemptions.
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
Payment of Redemption Proceeds
With the exception of redemptions to which the 1.00% transaction fee applies, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. For redemptions to which the additional transaction fee applies, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents, less an amount equal to 1.00% of the net asset value of such shares redeemed that the shareholder has held for less than one year. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents of the request and any other necessary documents in proper order. Such payment may be postponed or the right of redemption suspended as permitted by the 1940 Act. 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 purchase date, pending a determination that the check has cleared. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that a portfolio is obligated to redeem its shares solely
in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
Exchange Privilege
The exchange privilege is available to shareholders residing in any state in which the Shares being acquired may be legally sold. A shareholder may exchange Shares of the Fund for Investor Shares of any other Boston Partners Fund of RBB, subject to the restrictions described under "Exchange Privilege Limitations." Such exchange will be effected at the net asset value of the exchanged Fund and the net asset value of the Fund being acquired next determined after receipt of a request for an exchange by the Fund or its agents. An exchange of Shares will be treated as a sale for federal income tax purposes. See "Taxes." A shareholder wishing to make an exchange may do so by sending a written request to PFPC.
If the exchanging shareholder does not currently own Investor Shares of the Boston Partners Fund into which he would like to exchange, a new account will be established with the same registration, dividend and capital gain options as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees that are not part of these programs will not be accepted. The exchange privilege may be modified or terminated at any time, or from time to time, by RBB, upon 60 days' written notice to shareholders.
If an exchange is to a new account in the acquired Fund, the dollar value of Investor Shares acquired must equal or exceed that Fund's minimum for a new account; if to an existing account, the dollar value must equal or exceed that Fund's minimum for subsequent investments. If any amount remains in the Fund from which the exchange is being made, such amount must not drop below the minimum account value required by the Fund.
Exchange Privilege Limitations
The Fund's exchange privilege is not intended to afford shareholders a way to speculate on short-term movements in the market. Accordingly, in order to prevent excessive use of the exchange privilege that may potentially disrupt the management of the Fund and increase transaction costs, the Fund has established a policy of limiting excessive exchange activity.
Shareholders are entitled to six (6) exchange redemptions (at least 30 days apart) from the Fund during any twelve-month period. Notwithstanding these limitations, the Fund reserves the right to reject any purchase request (including purchases by exchange) that is deemed to be disruptive to efficient portfolio management.
Telephone Transactions
In order to request a telephone exchange or redemption, a shareholder must have completed and returned an account application containing a telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the exchange or redemption by calling (888) 261-4073. Neither RBB, the Fund, the Distributor, the Administrator nor any other Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures: (1) requiring the appropriate telephone transaction privilege forms; (2) requiring the caller to provide the names of the account owners, the account social security number and name of the Fund, all of which must match RBB's records; (3) requiring RBB's service representative to complete a telephone transaction form, listing all of the above caller identification information; (4) permitting exchanges only if the two account registrations are identical; (5) requiring that redemption proceeds be sent only by check to the account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (6) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) Business Days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Fund elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than the Distributor), financial institutions, securities dealers, financial planners and other industry professionals, additional documentation or information regarding the scope of a caller's authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by an attorney-in-fact under a power of attorney.
The net asset values for each class of a fund are calculated by adding the value of the proportionate interest of the class in a fund's cash, securities and other assets, deducting actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class is calculated independently of each other class. The net asset values are calculated as of the close of regular trading on the NYSE, generally 4:00 p.m. Eastern Time on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for
which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of the RBB'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.
With the approval of RBB's Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually and will pay them in the calendar year in which they are declared, generally in December. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
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. 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) 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, whether such gain was reflected in the price paid for the Shares, or whether such gain was attributable to bonds bearing tax-exempt interest. All other distributions, to the extent they are taxable, are taxed to shareholders as ordinary income.
RBB will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in 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 shares just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received, although the distribution is, in effect, a return of capital.
Shareholders who exchange shares representing interests in one Fund for shares representing interests in another Fund will generally recognize capital gain or loss for federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. Federal income tax treatment and should consult their tax advisers.
The Fund offers one other class of shares, Institutional Shares, which is offered directly to institutional investors pursuant to a separate prospectus. Shares of each class represent equal pro rata interests in the Fund and accrue dividends and calculate net asset value and performance quotations in the same manner. The Fund will quote performance of the Institutional Shares separately from Investor Shares. Because of different expenses paid by the Investor Shares, the total return on such shares can be expected, at any time, to be different than the total return on Institutional Shares. Information concerning other classes may be obtained by calling the Fund at (800) 311-9783 or 9829.
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ______ billion shares are currently classified into __ different classes of Common Stock. See "Description of Shares" in the Statement of Additional Information."
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO BOSTON PARTNERS MICRO CAP VALUE FUND AND DESCRIBE
ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO BOSTON PARTNERS MICRO CAP VALUE 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, even where a share has a different class designation than another share representing an interest in the Fund. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB 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, RBB will assist in shareholder 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. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of __________, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to PFPC Inc., the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (888) 261-4073.
Share Certificates
In the interest of economy and convenience, physical certificates representing Shares in the Fund are not normally issued.
Future 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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Russell 2000 Index. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as Business Week, Fortune, Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
[THIS PAGE INTENTIONALLY LEFT BLANK]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'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 RBB OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Table of Contents
Page
----
INTRODUCTION...................................... 4
INVESTMENT OBJECTIVES AND POLICIES................ 4
INVESTMENT LIMITATIONS............................ 7
RISK FACTORS...................................... 8
MANAGEMENT........................................ 8
DISTRIBUTION OF SHARES............................ 11
HOW TO PURCHASE SHARES............................ 13
HOW TO REDEEM AND EXCHANGE SHARES................. 15
NET ASSET VALUE................................... 20
DIVIDENDS AND DISTRIBUTIONS....................... 21
TAXES..............................................21
MULTI-CLASS STRUCTURE............................. 22
DESCRIPTION OF SHARES............................. 23
OTHER INFORMATION................................. 24
Investment Adviser
Boston Partners Asset Management, L.P. BOSTON PARTNERS
Boston, Massachusetts MICRO CAP
VALUE FUND
Custodian
PNC Bank, N.A. (Investor Shares)
Philadelphia, Pennsylvania
Transfer Agent and Administrator PROSPECTUS
PFPC Inc.
Wilmington, Delaware ___________, 1998
Distributor
Provident Distributors, Inc. bp
Conshohocken, Pennsylvania
|
BOSTON PARTNERS ASSET MANAGEMENT L.P.
Counsel -------------------------------------
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Independent Accountants
Boston Partners Micro Cap Value Fund bp
(Investor Class) BOSTON PARTNERS ASSET MANAGEMENT, L.P.
--------------------------------------
ACCOUNT APPLICATION
Please Note: Do not use this form to open a retirement plan account. For an IRA application or help with this Application,
please call 1-888-261-4073
+--------------+ (Please check the appropriate box(es) below.)
| 1 | |_| Individual |_| Joint Tenant |_| Other
| Account | ________________________________________________________________________________________________________
| Registration:| Name SOCIAL SECURITY NUMBER OR TAX ID # OF PRIMARY OWNER
+--------------+
________________________________________________________________________________________________________
NAME OF JOINT OWNER JOINT OWNER SOCIAL SECURITY NUMBER OR TAX ID #
For joint accounts, the account registrants will be joint tenants with right of survivorship and not
tenants in common unless tenants in common or community property registrations are requested.
--------------
GIFT TO MINOR: |_| Uniform Gifts/Transfer to Minor's Act
--------------
________________________________________________________________________________________________________
NAME OF ADULT CUSTODIAN (ONLY ONE PERMITTED)
________________________________________________________________________________________________________
NAME OF MINOR (ONLY ONE PERMITTED)
________________________________________________________________________________________________________
MINOR'S SOCIAL SECURITY NUMBER AND DATE OF BIRTH
------------------
CORPORATION,
PARTNERSHIP, TRUST
OR OTHER ENTITY:
------------------
________________________________________________________________________________________________________
NAME OF CORPORATION, PARTNERSHIP, OR OTHER NAME(S) OF TRUSTEE(S)
________________________________________________________________________________________________________
TAXPAYER IDENTIFICATION NUMBER
+--------------+ ________________________________________________________________________________________________________
| 2 | STREET OR P.O. BOX AND/OR APARTMENT NUMBER
| Mailing |
| Address: | ________________________________________________________________________________________________________
+--------------+ CITY STATE ZIP CODE
________________________________________________________________________________________________________
DAY PHONE NUMBER EVENING PHONE NUMBER
+--------------+ Minimum initial investment of $2,500 Amount of investment $____________
| 3 |
| Investment | Make the check payable to Boston Partners Micro Cap Value Fund.
| Information: |
+--------------+ Shareholders may not purchase shares of this Fund with a check issued by a third party and endorsed over to
the Fund.
------------
DISTRIBUTION Note: Dividends and capital gains may be reinvested or paid by check. If no options are selected
OPTIONS: below, both dividends and capital gains will be reinvested in additional Fund shares.
------------
Dividends |_| Pay by check |_| Reinvest |_| Capital Gains |_| Pay by check |_| Reinvest |_|
+--------------+ To use this option, you must initial the appropriate line below.
| 4 | I authorize the Transfer Agent to accept instructions from any persons to redeem or exchange shares in
| Telephone | my account(s) by telephone in accordance with the procedures and conditions set forth in the Fund's
| Redemption: | current prospectus.
+--------------+
|
Redeem shares, and send the proceeds to the
____________________________ ________________________________ address of record.
individual initial joint initial
____________________________ ________________________________ Exchange shares for shares of The Boston
individual initial joint initial Partners Large Cap Value Fund, Mid Cap
Value Fund, Bond Fund, Market Neutral Fund
or Long-Short Equity Fund
+--------------+ The Account Investment Plan which is available to shareholders of the Fund, makes possible regularly
| 5 | scheduled purchases of Fund shares to allow dollar-cost averaging. The Fund's Transfer Agent can
| Automatic | arrange for an amount of money selected by you to be deducted from your checking account and used to
| Investment | purchase shares of the Fund.
| Plan: |
+--------------+ Please debit $________ from my checking account (named below) on or about the 20th of the month. Please attach an
unsigned, voided check.
|_| Monthly |_| Every Alternate Month |_| Quarterly |_| Other
_______________ ________________________________________________________________________________________________________
BANK OF RECORD: BANK NAME STREET ADDRESS OR P.O. BOX
________________________________________________________________________________________________________
CITY STATE ZIP CODE
________________________________________________________________________________________________________
BANK ABA NUMBER BANK ACCOUNT NUMBER
+--------------+ The undersigned warrants that I (we) have full authority and, if a natural person, I (we) am (are) of
| 6 | legal age to purchase shares pursuant to this Account Application, and I (we) have received a current
| | prospectus for the Fund in which I (we) am (are) investing.
| Signatures: | Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is required to have the following
+--------------+ certification:
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a
number to be issued to), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have
not been notified by the Internal Revenue Service that I am subject to 31% backup withholding as a result
of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
Note: You must cross out item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because you have failed to report all interest and dividends on your tax
return. The Internal Revenue Service does not require your consent to any provision of this document
other than the certification required to audit backup withholding.
________________________________________________________________________________________________________
SIGNATURE OF APPLICANT DATE
________________________________________________________________________________________________________
PRINT NAME TITLE (IF APPLICABLE)
________________________________________________________________________________________________________
SIGNATURE OF JOINT OWNER DATE
________________________________________________________________________________________________________
PRINT NAME TITLE (IF APPLICABLE)
(If you are signing for a corporation, you must indicate corporate office or title. If you wish
additional signatories on the account, please include a corporate resolution. If signing as a fiduciary,
you must indicate capacity.)
For information on additional options, such as IRA Applications, rollover requests for qualified
retirement plans, or for wire instructions, please call us at 1-888-261-4073.
|
Mail completed Account Application and check to: The Boston Partners Micro Cap Value Fund
c/o PFPC Inc.
P.O. Box 8852
Wilmington, DE 19899-8852
|
SCHNEIDER SMALL CAP VALUE FUND
OF
THE RBB FUND, INC.
Schneider Small Cap Value Fund (the "Fund") is an investment portfolio of The RBB Fund, Inc. ("RBB"), an open-end management investment company. The shares offered by this Prospectus represent interests in the Fund. The Fund seeks long-term capital growth by investing primarily in common stocks of companies with relatively small capitalizations that are less than the largest company in the Russell 2000 Index and which Schneider Capital Management Company (the "Adviser") believes are undervalued.
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 and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund by calling (888) 520-3277. The Prospectus and the Statement of Additional Information are available for reference, along with other related materials, on the SEC Internet Web Site (http://www.sec.gov).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
_______, 1998
RBB is an open-end investment management company incorporated under the laws of the State of Maryland currently operating or proposing to operate seventeen separate investment portfolios. The Shares offered by this Prospectus represent interests in the Schneider Small Cap Value Fund. RBB was incorporated in Maryland on February 29, 1988.
FEE TABLE
The following table illustrates annual operating expenses to be incurred by the Fund (after expected fee waivers and expense reimbursements) based on expenses expected to be incurred in the current fiscal period. An example based on the summary is also shown.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after waivers)(1)(2)..........................0.10%
Other Expenses (after waivers and expense reimbursements)......1.00%
Total Fund Operating Expenses (after waivers)(2)...............1.10%
=====
(1) Management Fees are based on average daily net assets and are
calculated daily and paid monthly.
|
(2) Before fee waivers and expense reimbursements, Management Fees would be 1.00%; Other Expenses would be 1.25%; and Total Fund Operating Expenses would be 2.25%. Waivers are expected to remain in effect for the Fund's current fiscal year.
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:
ONE THREE
YEAR YEARS
---- -----
Schneider Small Cap Value Fund $11 $35
|
The 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 the various costs and expenses, see "Management" and "Distribution of Shares" below.) The Fee Table reflects expense reimbursements and voluntary waivers of Management Fees for the Fund. However, there can be no assurance that any future expense reimbursements and waivers of Management Fees will not vary from the figures reflected in the Fee Table.
The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
No financial data is supplied for the Fund because, as of August 31, 1998, the last day of RBB's most recent fiscal year, the Fund had no performance history.
The Fund seeks long-term capital growth by investing primarily in common stocks of companies which have relatively small capitalizations that are less than the largest company in the Russell 2000 Index and which Schneider Capital Management Company (the "Adviser") believes are undervalued. Under normal market conditions, at least 65% of the value of the Fund's total assets will be invested in these companies. As of July 30, 1998, the company with the largest market capitalization on the Russell 2000 Index was $1.9 billion. The Russell 2000 Index is an unmanaged index composed of the 2,000 smallest stocks in the Russell 3000, a market value weighted index of the 3,000 largest U.S. publicly-traded companies.
The Adviser selects securities for the Fund based on a continuous study of trends in industries and companies, industry literature, company reports, financial reports, company presentations, earnings power and growth and other investment criteria.
The Fund may invest in convertible securities. A convertible security is a bond, debenture, note, preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock of the same or a different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to nonconvertible debt securities in that they ordinarily provide a stable stream of income with generally higher yields than those of common stocks of the same or similar issuers. The Fund will invest in convertible securities without regard to their credit ratings.
The Fund may invest up to 20% of the value of its net assets in securities of foreign issuers. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operated in the United States. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. The Fund may hold from time to time various foreign currencies pending their investment in foreign
securities or their conversion into U.S. dollars. See "Risk Factors--Foreign Securities" below and "Investment Objectives and Policies--Foreign Securities" in the Statement of Additional Information.
The Fund may also invest up to 5% of the value of its net assets in derivative securities. The Fund may invest without limit in debt securities issued by U.S. banks, corporations and other business organizations that are investment grade securities; and debt securities issued by the U.S. Government or government agencies.
The Fund may lend securities to brokers, dealers and other financial institutions desiring to borrow securities to complete transactions and for other purposes. Because the government securities or other assets that are pledged as collateral to the Fund in connection with these loans generate income, securities lending enables the Fund to earn income that may partially offset expenses. These loans may not exceed 33 1/3% of the Fund's total assets. The documentation for these loans will provide that the Fund will receive collateral equal to at least 102% of the current market value of the loaned securities, as marked to market each day that the net asset value of the Fund is determined, consisting of government securities or other assets permitted by applicable regulations and interpretations. The Fund will pay reasonable administrative and custodial fees in connection with the loan of securities. The Fund will invest collateral in Short-Term Investments, and will bear the risk of loss of the invested collateral. In addition, the Fund will be exposed to the risk of loss should a borrower default on its obligation to return the borrowed securities. The Fund's share of income from the loan collateral will be included in its gross investment income.
The Fund may invest up to 15% of the value of its net assets in securities that are illiquid. The Fund may purchase securities which are not registered under the Securities Act of 1933 (the "1933 Act"), as amended, but which can be sold to "qualified institutional buyers" in accordance with Rule 144A under the 1933 Act. Any such security will not be considered illiquid so long as it is determined by the Adviser, acting under guidelines approved and monitored by the Board, that an adequate trading market exists for that security. This investment practice could have the effect of increasing the level of illiquidity in the Fund during any period that qualified institutional buyers become uninterested in purchasing these restricted securities.
The Fund may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. The financial institutions with whom the fund may enter into repurchase agreements will be banks which the Adviser considers creditworthy pursuant to criteria approved by the Board of Directors and non-bank dealers of U.S. Government securities that are listed on the Federal Reserve Bank of New York's list of reporting dealers. The Adviser will consider the creditworthiness of a seller in determining whether to have the Fund enter into a repurchase agreement. The seller under a repurchase agreement will be required to maintain the value of the securities subject to the agreement at notless than the repurchase price plus accrued interest. The Adviser will mark to market daily the value of the securities, and will, if necessary, require th seller to maintain additional securities to ensure that the value is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
In accordance with the above-mentioned policies, the Fund may invest up to 5% of the value of its net assets in each of the following types of investments: indexed securities, reverse repurchase agreements and dollar rolls, financial futures contracts, and options on futures contracts. See "Investment Objectives and Policies" in the Statement of Additional Information.
The Fund may invest up to 10% of its total assets in registered investment companies and shares of investment companies investing primarily in foreign securities including so-called "country funds." Country funds have portfolios consisting exclusively of securities of issuers located in one foreign country. See "Investment Objectives and Policies" in the Statement of Additional Information for more information on the Fund's ability to invest in investment
companies. If the Fund invests in such investment companies, the Fund will bear its proportionate share of the costs incurred by such companies, including investment advisory fees.
While the Adviser intends to fully invest the Fund's assets at all times in accordance with the above-mentioned policies, the Fund reserves the right to hold up to 100% of its assets, as a temporary defensive measure, in cash and eligible U.S. dollar-denominated money market instruments. Eligible money market instruments include bank obligations, such as certificates of deposit and bankers' acceptances issued by foreign or domestic banks or financial institutions that have total assets of more than $2.5 billion, commercial paper rated in the top rating category by S&P, Moody's, D&P or Fitch and unrated commercial paper determined to be of comparable quality by the Adviser, and repurchase agreements. The Adviser will determine when market conditions warrant temporary defensive measures. The Fund may invest cash balances in these instruments to maintain liquidity in amounts sufficient to meet expenses or for day-to-day operating purposes.
The Fund's investment objective and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in the Fund.
The Fund may not change the following investment limitations without shareholder approval, except as set forth below. (A complete list of the investment limitations that cannot be changed without such a vote of the shareholders is contained in the Statement of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
3. Borrow money or issue senior securities, except that the Fund may borrow from banks 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 has a non-fundamental policy which can be changed without shareholder approval, that it 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.
PORTFOLIO TURNOVER
The Fund retains the right to sell securities irrespective of how long they have been held. The Adviser estimates that the annual turnover in the Fund will be approximately 75%.
As with other mutual funds, there can be no assurance that the Fund will achieve its objective. The net asset value per share of Shares representing interests in the Fund will fluctuate as the values of its portfolio securities change in response to changing conditions in the equity market. An investment in the Fund is not intended to constitute a balanced investment program. Other risk factors are discussed above under "Investment Objectives and Policies" and in the Statement of Additional Information under "Investment Objectives and Policies."
EQUITY MARKETS. The Fund invests primarily in equity markets. Equity markets can be highly volatile, so that investing in the Fund involves substantial risk. In addition, the Fund can and will typically invest in stocks that are riskier and more volatile than the average stock. As a result, investing in this Fund involves risk of substantial loss of capital.
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. 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 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.
YEAR 2000. The services provided to the Fund by the Adviser and others depend in large part upon the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded or calculated. The Adviser has advised the Fund that the Adviser's own computer systems will correctly compute the year 2000. PFPC and the Fund's other service providers have advised the Fund that they have been reviewing all of their computer systems, are actively working on necessary changes to those systems to prepare for the year 2000 and expect that, given the extensive testing which they are undertaking, their systems will be year 2000 compliant before that year. There can, however, be no assurance that PFPC or any other service provider will be successful in achieving year 2000 compliance, or that interaction by the Adviser or other service providers with non-complying computer systems of other firms (such as broker-dealers or firms that provide securities pricing information) will not impair services to the Fund.
Investment methods described in this Prospectus are among those that the Fund has the power to utilize. Some may be employed on a regular basis; others may not be used at all. 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.
BOARD OF DIRECTORS
The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors.
INVESTMENT ADVISER
Schneider Capital Management Company, located at 460 East Swedesford Road, Suite 1080, Wayne, PA 19087, serves as the Fund's investment adviser. The Adviser provides investment management and investment advisory services to investment companies and other
institutional accounts that had aggregate total assets under management as of ________, 1998, in excess of $___ billion. Schneider Capital Management Company is 100% employee-owned, with a staff of fourteen, and was founded in 1996.
Subject to the supervision and direction of RBB's Board of Directors, the Adviser manages the Fund's portfolio in accordance with the Fund's investment objective and policies, makes investment decisions for the Fund, places orders to purchase and sell securities, and employs professional portfolio managers and securities analysts who provide research services to the Fund.
For its services to the Fund, the Adviser is entitled to receive under the Advisory Agreement a monthly advisory fee computed at an annual rate of 1.00% of the Fund's average daily net assets. The Adviser has voluntarily agreed to waive all or a portion of its fee and to reimburse expenses of the Fund in order to limit total operating expenses of the Fund to an annual rate of not more than 1.10% of the average daily net assets. The Adviser reserves the right, in its sole discretion, to terminate its voluntary fee waiver and reimbursements at any time.
The President and Chief Investment Officer of the Adviser, Arnold C. Schneider III, is primarily responsible for the day-to-day management of the Fund's investment portfolio. Mr. Schneider founded the Adviser in 1996, and has managed the Fund since its inception. Prior to 1996, he was a senior vice president and partner of the Wellington Management Company ("Wellington"), where he was responsible for institutional accounts and mutual fund portfolios since 1987.
John K. Schneider, Senior Vice President and Assistant Portfolio Manager, joined his brother at the inception of the firm and had previously been the Director of Research, Senior Vice President and Member of the Operating Committee of Newbold Asset Management. John brings ten years of investment experience to the firm, having started as a research analyst with Wilmington Capital in 1986.
ADMINISTRATOR
PFPC Inc. ("PFPC") serves as administrator to the Fund and generally assists the Fund in all aspects of its administration and operations, including matters relating to the maintenance of financial records and accounting. For its services, PFPC is entitled to receive a fee under an administration and accounting services agreement calculated at an annual rate of .125% of the Fund's average daily net assets.
ADMINISTRATIVE SERVICES AGENT
Provident Distributors Inc. ("PDI") provides certain administrative services to the Fund that are not provided by PFPC, subject to the supervision and direction of the Board of Directors of the Fund. As compensation for such administrative services, the Fund pays PDI each month a fee for the previous month calculated at the annual rate of .15% of the average daily net assets of
the Fund. PDI's principal business address is Four Falls Corporate Center, Conshohocken, Pennsylvania 19428-2961.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND CUSTODIAN
PNC Bank, National Association ("PNC Bank") serves as the Fund's custodian and PFPC serves as the Fund's transfer agent and dividend disbursing agent. The principal offices of PFPC, an indirect, wholly-owned subsidiary of PNC Bank, are located at 400 Bellevue Parkway, Wilmington, Delaware 19809.
DISTRIBUTOR
Provident Distributors, Inc. (the "Distributor" or "PDI")serves as the Company's distributor for the Shares pursuant to a distribution agreement (the "Distribution Agreement") with RBB on behalf of the Shares. No compensation is payable by the Company to PDI for distribution services with respect the Fund's Shares.
EXPENSES
The expenses of the Fund are deducted from its total income before dividends are paid. These expenses include, but are not limited to: fees paid to the Adviser and PFPC; fees and expenses of officers and directors who are not affiliated with any of RBB's investment advisers, sub-advisers or the Distributor; taxes; interest; legal fees; custodian fees; auditing fees; brokerage fees and commissions; certain of the fees and expenses of registering and qualifying the Fund and the Shares for distribution under federal and state securities laws; expenses of preparing prospectuses and statements of additional information and of printing and distributing them annually to existing shareholders that are not attributable to a particular class of shares of RBB; the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of RBB; fidelity bond and directors and officers' liability insurance premiums; the expense of using independent pricing services; and other expenses that are not expressly assumed by the Adviser under its investment advisory agreement with respect to the Fund. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios.
The Adviser may assume expenses of the Fund from time to time. To the extent any service providers assume expenses of the Fund, such assumption of expenses will have the effect of lowering the Fund's overall expense ratio and of increasing its yield to investors.
GENERAL
Shares representing interests in the Fund are offered continuously for sale by the Distributor and may be purchased without imposition of a sales charge. Shares may be purchased initially by completing the application included in this Prospectus and forwarding the application to the Fund's transfer agent, PFPC. Purchases of Shares may be effected by wire to an account to be specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the order of "The Schneider Small Cap Value Fund," c/o PFPC Inc., P.O. Box 8945, Wilmington, Delaware 19899-8945. Shareholders may not purchase shares of the Schneider Small Cap Value Fund with a check issued by a third party and endorsed over to the Fund. The name of the Fund, Schneider Small Cap Value Fund, must also appear on the check or Federal Reserve Draft. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in the Fund must be at least $250,000, and subsequent minimum investments must be at least $25,000. The Adviser reserves the right to waive the minimum initial or subsequent investment requirement. For purposes of meeting the minimum initial purchase, clients which are part of endowments, foundations, or other related groups may be aggregated. The Fund reserves the right to suspend the offering of Shares for a period of time or to reject any purchase order.
Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange, Inc. (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and 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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday.
The price paid for Shares purchased is based on the net asset value next computed after a purchase order is received in good order by the Fund or its agents. Orders received by the Fund or its agents prior to the close of the NYSE (generally 4:00 p.m. Eastern Time) are priced at that Business Day's net asset value. Orders received by the Fund or its agents after the close of the NYSE (generally 4:00 p.m. Eastern Time) are priced at the net asset value next determined on the following Business Day. In those cases where an investor pays for Shares by check, the purchase will be effected at the net asset value next determined after the Fund or its agents receives the order and the completed application.
An investor may also purchase Shares by having his bank or his broker wire Federal Funds to PFPC. An investor's bank or broker may impose a charge for this service. The Fund does not currently impose a service charge for effecting wire transfers but reserves the right to do so in the future. In order to ensure prompt receipt of an investor's Federal Funds wire for an initial investment, it is important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (888) 520-3277, and provide PFPC with your name, address, telephone number, Social Security or Tax Identification Number, the Fund selected, the amount being wired, and by which bank. PFPC will then provide an investor with a Fund account number. Investors with existing accounts should also notify PFPC prior to wiring funds.
B. Instruct your bank or broker to wire the specified amount, together with your assigned account number, to PFPC's account with PNC:
PNC Bank, N.A.
Philadelphia, PA 19103
ABA NUMBER: 0310-0005-3
CREDITING ACCOUNT NUMBER: 86-0172-6452
FROM: (name of investor)
ACCOUNT NUMBER: (Investor's account number with
the Fund)
FOR PURCHASE OF: Schneider Small Cap Value Fund
AMOUNT: (amount to be invested)
C. Fully complete and sign the application and mail it to the address shown thereon. PFPC will not process purchases until it receives a fully completed and signed application.
For subsequent investments, an investor should follow steps A and B above.
REDEMPTION BY MAIL
Shareholders may redeem for cash some or all of their Shares of the Fund at any time. To do so, a written request in proper form must be sent directly to Schneider Small Cap Value Fund, c/o PFPC Inc., P.O. Box 8945, Wilmington, Delaware 19899-8945. There is no charge for a redemption.
A request for redemption must be signed by all persons in whose names the Shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption would exceed $10,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s) must be guaranteed according to the procedures described below under "How to Redeem and Exchange Shares -- Exchange Privilege."
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other documents may be necessary.
INVOLUNTARY REDEMPTION
The Fund reserves the right to redeem a shareholder's account at any time the net asset value of the account falls below $500 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed.
PAYMENT OF REDEMPTION PROCEEDS
In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by the Fund or its agents. Payment for Shares redeemed is made by check mailed within seven days after acceptance by the Fund or its agents of the request and any other necessary documents in proper order. Such payment may be postponed or the right of redemption suspended as permitted by the rules of the SEC. If the Shares to be redeemed have been recently purchased by check, the Fund's transfer agent may delay mailing a redemption check, which may be a period of up to 15 days from date of purchase, pending a determination that the check has cleared. The Fund has elected to be
governed by Rule 18f-1 under the 1940 Act so that a portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a portfolio.
TELEPHONE TRANSACTIONS
In order to request an exchange or redemption by telephone, a shareholder must have completed and returned an account application containing the appropriate telephone election. To add a telephone option to an existing account that previously did not provide for this option, a Telephone Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the exchange or redemption by calling (888) 520-3277. Neither RBB, the Fund, the Distributor, the Administrator nor any Fund agent will be liable for any loss, liability, cost or expense for following RBB's telephone transaction procedures described below or for following instructions communicated by telephone that they reasonably believe to be genuine.
RBB's telephone transaction procedures include the following measures:
(1) requiring the appropriate telephone transaction privilege forms; (2)
requiring the caller to provide the names of the account owners, the account
social security number and name of the Fund, all of which must match RBB's
records; (3) requiring RBB's service representative to complete a telephone
transaction form, listing all of the above caller identification information;
(4) permitting exchanges only if the two account registrations are identical;
(5) requiring that redemption proceeds be sent only by check to the account
owners of record at the address of record, or by wire only to the owners of
record at the bank account of record; (6) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) Business Days of the call; and (7) maintaining tapes of
telephone transactions for six months, if the Fund elects to record shareholder
telephone transactions. For accounts held of record by broker-dealers (other
than the Distributor), financial institutions, securities dealers, financial
planners and other industry professionals, additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. Telephone transactions will not be
permitted in connection with IRA or other retirement plan accounts or by an
attorney-in-fact under a power of attorney.
Net asset value per share of the Fund is calculated by adding the value of all its securities to cash and other assets, deducting its actual and accrued liabilities and dividing by the total number of shares outstanding. The net asset value of the Fund is calculated and securities are valued as of the close of regular trading on the NYSE, generally 4:00 p.m. Eastern Time on each Business Day.
Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the average closing bid; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of RBB'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.
With the approval of RBB's Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information.
The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually and pays them in the calendar year in which they are declared, generally in December. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually.
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. 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) 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, whether such gain was reflected in the price paid for the shares, or whether such gain was attributable to bonds bearing tax-exempt interest. All other distributions, to the extent they are taxable, are taxed to shareholders as ordinary income.
RBB will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in 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 shares just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received, although the distribution is, in effect, a return of capital.
Shareholders who exchange shares representing interests in one Fund for shares representing interests in another Fund will generally recognize capital gain or loss for federal income tax purposes.
Shareholders who are non-resident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. federal income tax treatment.
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which _____ billion shares are currently classified into __ different classes of Common Stock. See "Description of Shares" in the Statement of Additional Information.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO SCHNEIDER SMALL CAP VALUE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO SCHNEIDER SMALL CAP VALUE 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, even where a share has a different class designation than another share representing an interest in
the Fund. Shares of the Fund do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable.
RBB 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, RBB will assist in shareholder 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. Further, shareholders of all investment portfolios of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when RBB's Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular investment portfolio. (See the Statement of Additional Information under "Additional Information Concerning Fund Shares" for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of the Fund are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of the Fund may elect all of the directors.
As of _______, 1998, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of RBB.
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the Fund's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries should be addressed to the Fund's transfer agent, PFPC, at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, toll-free (888) 520-3277.
SHARE CERTIFICATES
In the interest of economy and convenience, physical certificates representing Shares in the Fund are not normally issued.
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 fees, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The 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 may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Standard & Poor's 500 Stock Index, the Russell 1000 Value Index, the Russell 2000 Value Index, the Russell Mid Cap Value Index or the Dow Jones Industrial Average. Performance information may also include evaluation of the Fund by nationally recognized ranking services and information as reported in financial publications such as BUSINESS WEEK, FORTUNE, INSTITUTIONAL INVESTOR, MONEY MAGAZINE, FORBES, BARRON'S, THE WALL STREET JOURNAL, THE NEW YORK TIMES, or other national, regional or local publications. All advertisements containing performance data will include a legend disclosing that such performance data represents 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.
One of the principals of the Adviser, Arnold C.Schneider, III, is a party in litigation initiated against him on December 13, 1996 by representatives of his former firm, Wellington Management Company, LLP ("Wellington") in Massachusetts Middlesex County Superior Court. The litigation involves Mr. Schneider's withdrawal from Wellington and the terms of a non-competition agreement between Mr. Schneider and Wellington. Wellington is seeking injunctive relief and damages in an unspecified amount. On February 17, 1998, the court issued a decision on Wellington's request for an injunction. It found that Mr. Schneider had breached his duties to Wellington and prohibited Mr. Schneider from directly or indirectly providing investment advisory services to clients of his former firm until July 11, 2001. This decision has been appealed. The issue of liability and damages is expected to be determined by a jury. The court ruled that any findings by the court in its decision on injunctive relief would not be binding on the jury in the damages phase of the case.
TABLE OF CONTENTS
PAGE
INTRODUCTION............................2
INVESTMENT OBJECTIVES AND POLICIES......3
INVESTMENT LIMITATIONS..................5
RISK FACTORS............................6
MANAGEMENT..............................8
HOW TO PURCHASE SHARES.................11
HOW TO REDEEM AND EXCHANGE SHARES......12
NET ASSET VALUE........................14
DIVIDENDS AND DISTRIBUTIONS............15
TAXES................................. 15
DESCRIPTION OF SHARES..................16
OTHER INFORMATION......................17
LITIGATION.............................18
|
PROSPECTUS
________, 1998
SCHNEIDER SMALL CAP
VALUE FUND
INVESTMENT ADVISER
Schneider Capital Management Company
Wayne, Pennsylvania
CUSTODIAN
PNC Bank, N.A.
Philadelphia, Pennsylvania
TRANSFER AGENT AND ADMINISTRATOR
PFPC Inc.
Wilmington, Delaware
DISTRIBUTOR AND ADMINISTRATIVE SERVICES AGENT
Provident Distributors, Inc.
Conshohocken, Pennsylvania
COUNSEL
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
SCHNEIDER SMALL CAP VALUE FUND
SCHNEIDER CAPITAL MANAGEMENT COMPANY
ACCOUNT APPLICATION
PLEASE NOTE: Do not use this form to open a retirement plan account. For an IRA application or help with this Application,
please call 1-888-520-3277.
(Please check the appropriate box(es) below.)
+--------------+
| 1 |_| Individual |_| Joint Tenant |_| Other
| Account
| Registration: ------------------------------------------------------------------------------
+--------------+ Name SOCIAL SECURITY NUMBER OR TAX ID # OF PRIMARY OWNER
------------------------------------------------------------------------------
NAME OF JOINT OWNER JOINT OWNER SOCIAL SECURITY NUMBER OR TAX ID #
For joint accounts, the account registrants will be joint tenants with right of
survivorship and not tenants in common unless tenants in common or community
property registrations are requested.
--------------
GIFT TO MINOR: UNIFORM GIFTS/TRANSFER TO MINOR'S ACT
--------------
------------------------------------------------------------------------------
NAME OF ADULT CUSTODIAN (ONLY ONE PERMITTED)
------------------------------------------------------------------------------
NAME OF MINOR (ONLY ONE PERMITTED)
------------------------------------------------------------------------------
MINOR'S SOCIAL SECURITY NUMBER AND DATE OF BIRTH
------------------
CORPORATION,
PARTNERSHIP, TRUST
OR OTHER ENTITY:
------------------ ------------------------------------------------------------------------------
NAME OF CORPORATION, PARTNERSHIP, OR OTHER NAME(S) OF TRUSTEE(S)
------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER
+--------------+ ------------------------------------------------------------------------------
| 2 STREET OR P.O. BOX AND/OR APARTMENT NUMBER
| Mailing
| Address: ------------------------------------------------------------------------------
+--------------+ CITY STATE ZIP CODE
------------------------------------------------------------------------------
DAY PHONE NUMBER EVENING PHONE NUMBER
+--------------+ Minimum initial investment of $250,000 Amount of investment $____________
3 Make the check payable to Schneider Small Cap Value Fund.
Investment
| Information:
+--------------+ Shareholders may not purchase shares of this Fund with a check issued by a
third party and endorsed over to the Fund.
------------
DISTRIBUTION NOTE: Dividends and capital gains may be reinvested or paid by check. If no
OPTIONS: options are selected below, both dividends and capital gains will be
reinvested in additional Fund shares.
DIVIDENDS : |_| Pay by check |_| Reinvest |_| CAPITAL GAINS:
Pay by check |_| Reinvest |_|
+--------------+ To use this option, you must initial the appropriate line below.
| 4 I authorize the Transfer Agent to accept instructions from any persons to redeem or
Telephone exchange shares in my account(s) by telephone in accordance with the procedures and
| Redemption: conditions set forth in the Fund's current prospectus.
+--------------+
------------------ --------------Redeem shares, and send the proceeds to
individual initial joint initial the address of record.
------------------ --------------Exchange shares for shares of RBB
individual initial joint initial Money Market Fund.
--------------- ------------------------------------------------------------------------------
BANK OF RECORD: BANK NAME STREET ADDRESS OR P.O. BOX
---------------
------------------------------------------------------------------------------
CITY STATE ZIP CODE
------------------------------------------------------------------------------
BANK ABA NUMBER BANK ACCOUNT NUMBER
+--------------+ The undersigned warrants that I (we) have fully authority and, if a natural
5 person, I (we) am (are) of legal age to purchase shares pursuant to
Signatures: this Account Application, and I (we) have received a current prospectus for
+--------------+ the Fund in which I (we) am (are) investing.
Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is
required to have the following certification:
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service that I am subject to 31% backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding.
NOTE: YOU MUST CROSS OUT ITEM (2) ABOVE IF YOU HAVE BEEN NOTIFIED BY THE IRS
THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE YOU HAVE FAILED
TO REPORT ALL INTEREST AND DIVIDENDS ON YOUR TAX RETURN. THE INTERNAL REVENUE
SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER
THAN THE CERTIFICATION REQUIRED TO AUDIT BACKUP WITHHOLDING.
------------------------------------------------------------------------------
SIGNATURE OF APPLICANT DATE
------------------------------------------------------------------------------
PRINT NAME TITLE (IF APPLICABLE)
------------------------------------------------------------------------------
SIGNATURE OF JOINT OWNER DATE
------------------------------------------------------------------------------
PRINT NAME TITLE (IF APPLICABLE)
(If you are signing for a corporation, you must indicate corporate office or
title. If you wish additional signatories on the account, please include
a corporate resolution. If signing as a fiduciary, you must indicate
capacity.)
For information on additional options, such as IRA Applications, rollover
requests for qualified retirement plans, or for wire instructions, please
call us at 1-888-520-3277.
MAIL COMPLETED ACCOUNT APPLICATION AND CHECK TO: THE SCHNEIDER SMALL CAP VALUE FUND
C/O PFPC INC.
P.O. BOX 8945
WILMINGTON, DE 19899-8945
|
THE RBB FAMILY
Government Securities Portfolio,
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of a class (the "RBB Shares" or the "Shares") representing interests in one investment portfolio (the "Portfolio") of The RBB Fund, Inc. (the "Fund"): the Government Securities Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the RBB Prospectus of the Fund, dated ____________, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained from the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated __________, 1998.
CONTENTS
Prospectus
Page Page
---- ----
General..........................................
Investment Objectives and Policies...............
Directors and Officers........................... N/A
Investment Advisory, Distribution
and Servicing Arrangements.....................
Portfolio Transactions........................... N/A
Purchase and Redemption Information..............
Valuation of Shares..............................
Performance and Yield Information................ N/A
Taxes............................................
Additional Information Concerning Fund
Shares.........................................
Miscellaneous.................................... N/A
Financial Statements ............................ N/A
Appendix A....................................... A-1
Appendix B....................................... B-1
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to one class of shares (the "RBB Class") representing interests in one of the investment portfolios of the Fund: the Government Securities Portfolio. The RBB Class is offered by the Prospectus dated ___________, 1998. The (the "Portfolio") Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolio. A description of ratings of certain instruments the Portfolio may purchase is set forth in Appendix A to the Prospectus.
Additional Information on Portfolio Investments.
When-Issued Securities. The Portfolio may purchase "when-issued" and delayed delivery securities which are securities purchased for delivery beyond the normal settlement date at a stated price and yield. While such commitments are outstanding, the Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, a Portfolio's custodian will set aside portfolio securities to satisfy a purchase commitment and, in such a case, such Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of such Portfolio's commitment. It may be expected that a Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. A Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments. The Portfolio expects that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When a Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. With respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or
nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in a Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Futures Contracts. The Portfolio may invest in futures contracts and options thereon. These instruments are described in Appendix "B" hereto.
Purchasing Put Options. By purchasing a put option, a Portfolio obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. The option may give a Portfolio the right to sell only on the option's expiration date, or may be exercisable at any time up to and including that date. In return for this right, a Portfolio pays the current market price for the option (known as the option premium). The option's underlying instrument may be a security, or a futures contract.
A Portfolio may terminate its position in a put option it has purchased by allowing it to expire or by exercising the option. If the option is allowed to expire, the Portfolio will lose the entire premium it paid. If the Portfolio exercises the option, it completes the sale of the underlying instrument at the strike price. If the Portfolio exercises a put option on a futures contract, it assumes a seller's position in the underlying futures contract. Purchasing an option on a futures contract does not require the Portfolio to make futures margin payments unless it exercises the option. A Portfolio may also terminate a put option position by closing it out in the secondary market at its current price, if a liquid secondary market exists.
Put options may be used by a Portfolio to hedge securities it owns, in a manner similar to selling futures contracts, by locking in a minimum price at which the Portfolio can sell. If security prices fall, the value of the put option would be expected to rise and offset all or a portion of the Portfolio's resulting losses. However, option premiums tend to decrease over time as the expiration date nears. Therefore, because of the cost of the option in the form of the premium (and transaction costs), a Portfolio would expect to suffer a loss in the put option if prices do not decline sufficiently to offset the deterioration in the value of the option premium. At the same time, because the maximum a Portfolio has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Portfolio to profit from an increase in the value of the securities hedged to the same extent as selling a futures contract.
Purchasing Call Options. The features of call options are essentially the same as those of put options, except that the purchaser of a call option obtains the right to purchase, rather than sell, the underlying instrument at the option's strike price (call options on futures contracts are settled by purchasing the underlying futures contract). By purchasing a call option, a Portfolio would attempt to participate in potential price increases of the underlying instrument, with results similar to those obtainable from purchasing a futures contract, but with risk limited to the cost of the option if security prices fell. At the same time, a Portfolio can expect to suffer a loss if security prices do not rise sufficiently to offset the cost of the option.
Writing Put Options. When a Portfolio writes a put option, it takes the opposite side of the transaction from the option's purchaser. In return for receipt of the premium, a Portfolio assumes the obligation to pay the strike price for the option's underlying instrument if the other party to the option chooses to exercise it. A Portfolio may seek to terminate its position in a put option it writes before exercise by closing out the option in the secondary market at its current price. If the secondary market is not liquid for an option the Portfolio has written, however, the Portfolio must continue to be prepared to pay the strike price while the option is outstanding, regardless of price changes, and must continue to set aside assets to cover its position.
A Portfolio may write put options as an alternative to purchasing actual securities. If security prices rise, the Portfolio would expect to profit from a written put option, although its gain would be limited to the amount of the premium it received. If security prices remain the same over time, it is likely that the Portfolio will also profit, because it should be able to close out the option at a lower price. If security prices fall, the Portfolio would expect to suffer a loss. This loss should be less than the loss the Portfolio would have experienced from purchasing the underlying instrument directly, however, because the premium received for writing the option should mitigate the effects of the decline. As with other futures and options strategies used as alternatives for purchasing securities, the Portfolio's return from writing put options generally will involve a smaller amount of interest income than purchasing longer-term securities directly, because the Portfolio's cash will be invested in shorter-term securities which usually offer lower yields.
Writing Call Options. Writing a call option obligates a Portfolio to sell or deliver the option's underlying instrument, in return for the strike price, upon exercise of the option. The characteristics of writing call options are similar to those of writing put options, as described above, except that writing covered call options generally is a profitable strategy if prices remain the same or fall. Through receipt of the option premium, the Portfolio would seek to mitigate the effects of a price decline. At the same time, because a Portfolio would have to be prepared to deliver the underlying instrument in return for the strike price, even if its current value is greater, the Portfolio would give up some ability to participate in security price increases when writing call options.
Combined Option Positions. A Portfolio may purchase and write options in combination with each other to adjust the risk and return characteristics of the overall position. For example, a Portfolio may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.
Risks of Options Transactions. Options are subject to certain risks, including the risk of imperfect correlation between the option and a Portfolio's other investments and the risk that there might not be a liquid secondary market for the option. Options are also subject to the risks of an illiquid secondary market, particularly in strategies involving writing options, which a Portfolio cannot terminate by exercise. In general, options whose strike prices are close to their underlying instruments' current value will have the highest trading volume, while options whose strike prices are further away may be less liquid. The liquidity of options may also be affected if options exchanges impose trading halts, particularly when markets are volatile. See Appendix "B" for a discussion of the risks of options on futures contracts.
Asset Coverage for Futures and Options Positions. A Portfolio will not use leverage in its options and futures strategies. Such investments will be made for hedging purposes only. A Portfolio will hold securities or other options or futures positions whose values are expected to offset its obligations under the hedge strategies. A Portfolio will not enter into an option or futures position that exposes the Portfolio to an obligation to another party unless it owns either (i) an offsetting position in securities or other options or futures contracts or (ii) cash, receivables and liquid securities with a value sufficient to cover its potential obligations. A Portfolio will comply with guidelines established by the SEC with respect to coverage of options and futures strategies by mutual funds, and if the guidelines so require will set aside cash and liquid securities in a segregated account with its custodian bank in the amount prescribed. Securities held in a segregated account cannot be sold while the futures or option strategy is outstanding, unless they are replaced with similar securities. As a result, there is a possibility that segregation of a large percentage of the Portfolio's assets could impede portfolio management or the Portfolio's ability to meet redemption requests or other current obligations.
Limitations on Futures and Options Transactions. The Fund on behalf of the Portfolio has filed a notice of eligibility for exclusion from the definition of the term "commodity pool operator" with the Commodity Futures Trading Commission ("CFTC") and the National Futures Association, which regulate trading in the futures markets. Pursuant to Section 4.5 of the regulations under the Commodity Exchange Act, the notice of eligibility includes the following representations:
(a) The Portfolio will use commodity futures contracts and related commodity options solely for bona fide hedging purposes within the meaning of CFTC regulations; provided that the Portfolio may hold long positions in commodity futures contracts and related commodity options that do not fall within the definition of bona fide hedging transactions if the positions are
used as part of a portfolio management strategy and are incidental to the Portfolio's activities in the underlying cash market, and the underlying commodity value of the positions at all times will not exceed the sum of (i) cash or United States dollar-denominated high quality short-term money market instruments set aside in an identifiable manner, plus margin deposits, (ii) cash proceeds from existing investments due in 30 days, and (iii) accrued profits on the positions held by a futures commission merchant; and
(b) The Portfolio will not enter into any commodity futures contract or option on a commodity futures contract if, as a result, the sum of initial margin deposits on commodity futures contracts and related commodity options and premiums paid for options on commodity futures contracts the Portfolio has purchased, after taking into account unrealized profits and losses on such contracts, would exceed 5% of the Portfolio's total assets.
In addition, the Portfolio will not enter into any futures contract and any option if, as a result, the sum of (i) the current value of assets hedged in the case of strategies involving the sale of securities, and (ii) the current value of securities or other instruments underlying the Portfolio's other futures or options positions, would exceed 50% of the Portfolio's net assets.
The Portfolio's limitations on investments in futures contracts and its policies regarding futures contracts and the limitations on investments in options and its policies regarding options discussed above in this Statement of Additional Information, are not fundamental policies and may be changed as regulatory agencies permit. A Portfolio will not modify the above limitations to increase its permissible futures and options activities without supplying additional information in a current Prospectus or Statement of Additional Information that has been distributed or made available to the Portfolio's shareholders.
Short Sales "Against the Box." In a short sale, a Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio may engage in short sales if at the time of the short sale it owns or has the right to obtain, at no additional cost, an equal amount of the security being sold short. This investment technique is known as a short sale "against the box." In a short sale, a seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. If a Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for speculative purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio involved plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which the Portfolio 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 Portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio'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. The accrued premium is the amount specified 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 Portfolio's adviser will mark-to-market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio involved under the 1940 Act.
Loans of Portfolio Securities. With respect to loans by the Portfolio of its portfolio securities as described in the Prospectus, the Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations.
Illiquid Securities. The Portfolio may invest up to 15% of its net assets in illiquid securities, including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted
securities and are purchased directly from the issuer or in the secondary market. 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.
The Portfolio may purchase securities which are not registered under the Securities Act but which may 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 Portfolio's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Portfolio's investment adviser will monitor the liquidity of restricted securities in the Portfolio pursuant to guidelines established by and under the supervision of the Board of Directors. 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 Fund. In reaching liquidity decisions, the investment 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).
Investment Limitations.
The Government Securities Portfolio may not:
1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's total assets may be invested without regard to such limitations;
2. Borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio
securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
3. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Portfolio to be invested in the obligations of issuers in any industry, provided that there is no limitation with respect to investments in U.S. Government obligations; (In determining whether the Portfolio has complied with this limitation No. 3 above, the Portfolio will not take into account the value of options and futures.)
4. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies;
5. Purchase securities on margin (but may make margin payments in connection with transactions in financial futures contracts and related options) or purchase real estate or interests therein, commodities or commodity contracts except financial futures contracts and related options;
6. Engage in the underwriting of securities by other issuers, except to the extent that the Portfolio may be deemed to be an underwriter in selling, as part of an offering registered under the Securities Act, securities which it has acquired, or participate on a joint or joint-and-several basis in any securities trading account. The "bunching" of orders with other accounts under the management of the investment adviser to save commissions or to average prices among them is not deemed to result in a securities trading account;
7. Effect a short sale of any security except in hedging strategies, and then only to the extent such investments do not exceed 25% of the Portfolio's net asset value or issue senior securities except as permitted by limitation 2 above. For purposes of this restriction, the purchase and sale of financial futures and related options does not constitute the issuance of a senior security;
8. Purchase securities of any company with a record of less than three years' continuous operation if such purchase would cause the Portfolio's investments in all such companies taken at cost to exceed 5% of the Portfolio's total assets taken at market value;
9. Invest for the purpose of exercising control over or management of any company;
10. Invest more than 10% of its total assets in the securities of other investment companies; or
11. Purchase interest in oil, gas or other mineral exploration programs; however, this policy will not prohibit the acquisition of securities of companies engaged in the production or transmission of oil, gas or other minerals.
The foregoing investment limitations cannot be changed without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal
Occupation
During Past
Name, Address and Age Position with Fund Five Years
--------------------- ------------------ ----------
Arnold M. Reichman, 50* Director Senior Managing Director,
466 Lexington Avenue Chief Operating Officer
New York, NY 10017 and 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.
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Principal
Occupation
During Past
Name, Address and Age Position with Fund Five Years
--------------------- ------------------ ----------
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, 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase
Philadelphia, PA 19111 Cancer Center (biomedical
research and medical
care.)
Marvin E. Sternberg, 63 Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc.
(manufacturer of dental
supplies and precision
coated abrasives); since
1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart, Inc.)
and Mart PMM, Inc.
(formerly Pennsauken
Merchandise Mart, Inc.
(shopping centers); and
since 1975, Director and
Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of
disposable headwear).
-11-
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Principal
Occupation
During Past
Name, Address and Age Position with Fund Five Years
--------------------- ------------------ ----------
Julian A. Brodsky, 64 Director Director and Vice-Chairman
1234 Market Street since 1969, Comcast
16th Floor Corporation (cable
Philadelphia, PA 19107-3723 television and
communications);Director,
Comcast Cablevision of
Philadelphia (cable
television and
communications) and Nextel
(wireless communications).
Donald van Roden, 73 Director and Self-employed businessman.
1200 Old Mill Lane Chairman of the From February 1980 to
Wyomissing, PA 19610 Board March 1987, Vice Chairman,
SmithKline Beecham
Corporation
(pharmaceuticals);
Director, AAA Mid-Atlantic
(auto service); Director,
Keystone Insurance Co.
Edward J. Roach, 74 President and Certified Public
Suite 100 Treasurer Accountant; Vice Chairman
Bellevue Park of the Board of Fox Chase
Corporate Center Cancer Center; Trustee
400 Bellevue Parkway Emeritus, Pennsylvania S
Wilmington, DE 19809 chool for the 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.
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Principal
Occupation
During Past
Name, Address and Age Position with Fund Five Years
--------------------- ------------------ ----------
Morgan R. Jones, 59 Secretary Chairman, the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath
1345 Chestnut Street LLP; Director, Rocking
Philadelphia, PA 19107-3496 Horse Child Care Centers
of America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser or sub-adviser of the Fund or the Distributor and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 $6,000 per year for his services in this capacity. Directors who are not affiliated persons of the Fund and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
Pension or
Retirement Estimated
Aggregate Benefits Accrued Annual
Name of Person/ Compensation as Part of Fund Benefits Upon
Position from Registrant Expenses Retirement
---------------- --------------- ---------------- ---------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990, the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee) pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolio's adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory Agreement. The advisory services provided by BIMC and the fees received by it for such services are described in the Prospectus. BIMC renders advisory services to the Portfolio pursuant to an Investment Advisory and Administration Agreement. The Advisory Agreement relating to the Portfolio is dated June 25, 1990. Such advisory and administration agreement is hereinafter referred to as the "Advisory Agreement."
For the fiscal year ended August 31, 1998, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
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Government $ $ $ Securities Portfolio
For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- ------------------
Government $ 0 $30,188 $71,645
Securities Portfolio
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*2 moved from here; text not shown
For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- ------------------
Government $ 0 $39,247 $82,957
Securities Portfolio
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The Portfolio bears all of its own expenses not specifically assumed by BIMC. General expenses of the Fund not readily identifiable as belonging to a portfolio of the Fund are allocated among all investment portfolios by or under the direction of the Fund's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and
any losses incurred in connection therewith; (b) fees payable to and
expenses incurred on behalf of a portfolio by BIMC; (c) expenses of organizing
the Fund that are not attributable to a class of the Fund; (d) certain of the
filing fees and expenses relating to the registration and qualification of the
Fund and a portfolio's shares under federal and/or state securities laws and
maintaining such registrations and qualifications; (e) fees and salaries payable
to the Fund's directors and officers; (f) taxes (including any income or
franchise taxes) and governmental fees; (g) costs of any liability and other
insurance or fidelity bonds; (h) any costs, expenses or losses arising out of a
liability of or claim for damages or other relief asserted against the Fund or a
portfolio for violation of any law; (i) legal, accounting and auditing expenses,
including legal fees of special counsel for the independent directors; (j)
charges of custodians and other agents; (k) expenses of setting in type and
printing prospectuses, statements of additional information and supplements
thereto for existing shareholders, reports, statements, and confirmations to
shareholders and proxy material that are not attributable to a class; (1) costs
of mailing prospectuses, statements of additional information and supplements
thereto to existing shareholders, as well as reports to shareholders and proxy
material that are not attributable to a class; (m) any extraordinary expenses;
(n) fees, voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; (o) costs of mailing and
tabulating proxies and costs of shareholders' and directors' meetings; (p) costs
of BIMC's use of independent pricing services to value a portfolio's securities;
and (q) the cost of investment company literature and other publications
provided by the Fund to its directors and officers. The RBB Class of the Fund
pays its own distribution fees and may pay a different share than the other
classes of the Portfolio of other expenses (excluding advisory and custodial
fees) if those expenses are actually incurred in a different amount by the RBB
Class or if it receives different services.
Under the Advisory Agreement, BIMC will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC in the performance of its duties or from reckless disregard of its duties and obligations thereunder.
The Advisory Agreement was most recently approved for continuation with respect to the Portfolio on July 29, 1998 by vote of the Fund'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 with respect to the Portfolio by shareholders of the Portfolio at a special meeting held July 26, 1991, as adjourned. The Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the Portfolio, at any time without penalty, on 60 days' written notice to BIMC. The Advisory Agreement may also be terminated by BIMC on 60 days' written notice to the Fund. The Advisory Agreement terminates automatically in the event of assignment thereof.
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the Portfolio, (b) holds and transfers portfolio
securities on account of the Portfolio, (c) accepts receipts and makes disbursements of money on behalf of the Portfolio, (d) collects and receives all income and other payments and distributions on account of the Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning the Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon the Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Shares pursuant to a Transfer Agency Agreement dated June 29, 1990 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems Shares of the Portfolio, (b) addresses and mails all communications by the Portfolio to record owners of the Shares, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of the Portfolio. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp.
For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $11.00 per account for orders which are placed via third parties and electronically relayed to PFPC, and at an annual rate of $13.00 per account for all other orders, exclusive of out-of-pocket expenses, and also receives reimbursement of its out-of-pocket expenses.
PFPC has entered into, and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolio. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolio for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Administration Agreements. PFPC serves as administrator to the Portfolio pursuant to an Administration Agreement effective April 10, 1991 (the "Administration Agreement"). PFPC has agreed to furnish to the Fund on behalf of the Portfolio statistical and
research data, clerical, accounting and bookkeeping services, and certain other services required by the Fund. In addition, PFPC has agreed to prepare and file various reports with the appropriate regulatory agencies and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreement, PFPC receives a fee of .10% of the average daily net assets of the Portfolio.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Government Securities
Portfolio $ $ $
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**3 For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Government Securities
Portfolio $0 $7,547 $0
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For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Government Securities
Portfolio $0 $9,813 $0
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*3 moved from here; text not shown
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, (the "Distribution Agreement") entered into by the Distributor and
the Fund on behalf of the RBB Class, and a Plan of Distribution, as amended, for the RBB Class (as amended, the "Plan") which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of the RBB Class. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreements, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to Authorized Dealers for selling shares of the Portfolio based on a percentage of the amounts invested by their customers.
The Plan was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to the Plan ("12b-1 Directors").
Among other things, the Plan provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the RBB Class shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the Class; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of such directors who are not "interested persons" of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the RBB Family Class of the Government Securities Portfolio in the aggregate amount of $_____. Of that amount, $_____ was paid to dealers with whom PDI had entered into dealer agreements and $_____ was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the Plans for the RBB Family Class of the Government Securities Portfolio in the aggregate amount of $_____. Of that amount, $_____ was paid to dealers with whom Counsellors had entered into dealer agreements and $______ was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plan by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
The Distribution Agreement also provides that the Distributor will be entitled to receive sales commissions equal to 4.99% of the net asset value of shares sold in any month, with such commissions being reduced for volume sales and sales made under certain purchase programs described in the Prospectus. Notwithstanding the foregoing, certain classes of investors described in the Prospectus who are associated with the Fund, the Distributor, BIMC, PNC Bank or PFPC are not charged any sales commissions.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors, BIMC is responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Portfolio. In executing portfolio transactions, BIMC seeks to obtain the best net results for the Portfolio, 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 BIMC 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.
The Portfolio does not have any obligation to deal with any broker or group of brokers in the execution of portfolio transactions. BIMC may, consistent with the interests of a Portfolio and subject to the approval of the Board of Directors, select brokers on the basis of the research, statistical and pricing services they provide to a Portfolio and other clients of BIMC. Information and research received from such brokers will be in addition to, and not in lieu of, the services required to be performed by BIMC under its respective contract. 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 BIMC, as applicable, determines in good faith that such commission is reasonable in terms either of the transaction or the overall responsibility of BIMC to a Portfolio and its other clients and that the total commissions paid by a Portfolio will be reasonable in relation to the benefits to the Portfolio 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 Portfolio 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.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that a
Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
Portfolio Security Value
During the years ended August 31, 1996 through August 31, 1998, the Portfolio did not pay any brokerage commissions.
The Portfolio expects that its annual portfolio turnover rate will not exceed 200%. A high rate of portfolio turnover involves correspondingly greater brokerage commission expenses and other transaction costs, which must be borne directly by the Portfolio. For the year ended August 31, 1998, the Portfolio had a turnover rate of 23%. The Portfolio 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 Portfolio's annual sales or purchases of portfolio securities (exclusive of purchases or sales of securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the portfolio during the year.
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right to redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
An illustration of the computation of the public offering price per RBB Class Share of the Portfolio, based on the value of the Portfolio's net assets as of August 31, 1998, is as follows:
Net Assets..................................... $
Outstanding Shares............................. $
Net Asset Value
Per Share.................................... $
Maximum Sales Charge,
4.75% of offering
price (4.96% of net asset
value per share)............................... $
Offering Price to
Public......................................... $
Total front-end sales charges paid by shareholders of RBB Class Shares of the Portfolio for the year ended August 31, 1998 were $_________.
A front-end sales charge will be imposed (unless an exemption from the sales charge applies) when shares of other classes of the Fund are redeemed and the proceeds are used to purchase RBB Class Shares of the Portfolio.
VALUATION OF SHARES
The net asset value per share of each class of the Portfolio is calculated as of 12 noon Eastern Time and as of the close of the NYSE (generally 4:00 p.m. Eastern Time) on each Business Day. "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, Christmas Day and on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. Securities which are listed on stock exchanges 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 evaluation. 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 as the primary market. Securities traded in the over-the-counter market and listed on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") are valued at the last trade price listed on the NASDAQ at 4:00 p.m.; securities listed on NASDAQ for which there were no sales on that day and other over-the-counter securities are valued at the mean of the bid and asked prices available prior to valuation. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Fund'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. The net asset value per share for each class of the Portfolio is calculated by adding the value of the proportionate interest of the class in the Portfolio's cash, securities and other assets, deducting the actual and accrued liabilities of the class, and dividing the result by the number of outstanding shares of the class.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE AND YIELD INFORMATION
Total Return. For purposes of quoting and comparing the performance of the Portfolio to that of other mutual funds and to stock or other relevant indices in advertisements or in reports to shareholders, performance may be stated in terms of total return. Under the rules of the Securities and Exchange Commission, funds advertising performance must include total return quotes calculated according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value at the end of the 1, 5 or 10 year
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periods (or fractional portion thereof) of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10 year periods.
Under the foregoing formula, the time periods used in advertising will be based on rolling calendar quarters, updated to the last day of the most recent quarter prior to submission of the advertisement for publication, and will cover one, five and ten year periods or a shorter period dating from the effectiveness of the Fund's registration statement. In calculating the ending redeemable value, the maximum sales load is deducted from the initial $1,000 payment and all dividends and distributions by the Fund are assumed to have been reinvested at net asset value, as described in the Prospectus, on the reinvestment dates during the period. Total return, or "T" in the formula above, is computed by finding the average annual compounded rates of return over the 1, 5 and 10 year periods (or fractional portion thereof) that would equate the initial amount invested to the ending redeemable value. Any sales loads that might in the future be made applicable at the time to reinvestments would be included as would any recurring account charges that might be imposed by the Fund.
The Portfolio may also from time to time include in such advertising an aggregate total return figure or a total return figure that is not calculated according to the formula set forth above in order to compare more accurately a Portfolio's performance with other measures of investment return. For example, in comparing a Portfolio's total return with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average, as appropriate, the Portfolio may calculate its aggregate and/or average annual total return for the specified periods of time by assuming the investment of $10,000 in Portfolio shares and assuming the reinvestment of each dividend or other distribution at net asset value on the reinvestment date. The Portfolio does not, for these purposes, deduct from the initial value invested any amount representing sales charges. The Portfolio will, however, disclose the maximum sales charge and will also disclose that the performance data do not reflect sales charges and that inclusion of sales charges would reduce the performance quoted. Such alternative total return information will be given no greater prominence in such advertising than the information prescribed under SEC rules, and all advertisements containing performance data will include a legend disclosing that such performance data represent past performance and that the investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
Calculated according to the SEC rules, for the year ended August 31, 1998, both the average annual total return and the aggregate total return for the Government Securities Portfolio were _______%. Calculated according to the SEC rules, for the period beginning on the commencement of the Portfolio's operations and ending August 31, 1998, the average annual total return for the Portfolio (commencing August 1, 1991) was ______%. For the same period, the aggregate total return for the Portfolio (commencing August 1, 1991) was __________%.
Calculated according to the non-standardized computation, which assumes no sales charges and reinvestment of all distributions for the year ended August 31, 1998, both the average annual total return and the aggregate total return for the Portfolio were _______%. Calculated also according to the non-standardized computation for the period beginning on the commencement of the Portfolio's operations and ending on August 31, 1998, the average annual total return for the Portfolio was _______%. The aggregate total return for the Portfolio calculated according to the non-standardized computation for the period beginning on the commencement of the Portfolio's operations and ending on August 31, 1998 was _______%.
Yield. The Portfolio may also advertise its yield. Under the rules of the SEC, the Portfolio advertising yield must calculate yield using the following formula:
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last
day of the period.
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Under the foregoing formula, yield is computed by compounding semi-annually, the net investment income per share earned during a 30 day period divided by the maximum offering price per share on the last day of the period. For the purpose of determining the interest earned (variable "a" in the formula) on debt obligations that were purchased by a Portfolio at a discount or premium, the formula generally calls for amortization of the discount or premium; the amortization schedule will be adjusted monthly to reflect changes in the market values of the debt obligations.
The yield for the 30-day period ended August 31, 1998 for the Portfolio was ______%.
From time to time, in advertisements or in reports to shareholders with respect to a Portfolio, the yields of such Portfolio may be quoted and compared to those of other mutual
funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and to distribute out its income to
Shareholders each year, so that the Portfolio itself generally will be relieved
of federal income and excise taxes. If the Portfolio were to fail to so qualify:
(1) the Portfolio would be taxed at regular corporated rates without any
deduction for distributions to Shareholders; and (2) Shareholders would be taxed
as if they received ordinary dividends, although corporate Shareholders could be
eligible for the dividends received deduction.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class
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), 700 million Shares are classified as Principal Class 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 P Common Stock constitute the RBB Class of the Government Securities Portfolio. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws
provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule, the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law, (for example by Rule 18f-2 discussed above) or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding voting securities 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 Fund and the non-interested directors.
Independent Accountants.[ ], serves as the Fund's independent accountants.
Control Persons. As of ___________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory or sub-advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ] The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
Bear Stearns Money Market Portfolio
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of a class (the "Bedford Shares" or the "Shares") representing interests in the Money Market Portfolio (the "Portfolio") of The RBB Fund, Inc. (the "Fund"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with The RBB Fund Money Market Portfolio (Bedford Shares) Prospectus of the Fund, dated ______________, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ______________, 1998.
CONTENTS
General........................................................................ Investment Objectives and Policies............................................. Directors and Officers......................................................... Investment Advisory, Distribution and Servicing Arrangements................... Portfolio Transactions......................................................... Purchase and Redemption Information............................................ Valuation of Shares............................................................ Performance Information........................................................ Taxes.......................................................................... Additional Information Concerning Fund Shares.................................. Miscellaneous.................................................................. Financial Statements........................................................... Appendix.......................................................................
No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to shares of the class of common stock of the Fund (the "Class") representing interests in the Money Market Portfolio of the Fund. The Class is offered by the Prospectus dated ______________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolio. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by the Portfolio pursuant to the Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by
the Money Market Portfolio may have maturities of more than 13 months, provided:
(i) the Portfolio is entitled to the payment of principal at any time, or during
specified intervals not exceeding 13 months, upon giving the prescribed notice
(which may not exceed 30 days), and (ii) the rate of interest on such
instruments is adjusted at periodic intervals which may extend up to 13 months.
In determining the average weighted maturity of the Money Market Portfolio and
whether a variable rate demand instrument has a remaining maturity of 13 months
or less, each long-term instrument will be deemed by the Portfolio to have a
maturity equal to the longer of the period remaining until its next interest
rate adjustment or the period remaining until the principal amount can be
recovered through demand.
The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right, and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Portfolio may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Portfolio has such commitments outstanding, the Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or other liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that the Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because the Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, the Portfolio expects that commitments to purchase "when issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When the Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in the Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. The Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
The Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, the Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio will not exceed 1/2 of 1% of the value of the Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
The Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. Either such Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where the Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by the Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note is backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds
issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds that are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Maritime Administration, International Bank for Reconstruction and
Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements
described in the Prospectus generally equals the price paid by the Portfolio
plus interest negotiated on the basis of current short-term rates (which may be
more or less than the rate on the securities underlying the repurchase
agreement). The financial institutions with which the Portfolio 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 Portfolio's adviser or sub-adviser. The Portfolio's adviser or sub-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 Portfolio's
adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or
(ii) the daily amortization of the difference between the purchase price and the
repurchase price specified in the repurchase agreement. The Portfolio's adviser
or sub-adviser will mark-to-market daily the value of the securities. Securities
subject to repurchase agreements will be held by the Fund's custodian in the
Federal Reserve/Treasury book-entry system or by another authorized securities
depository. Repurchase agreements are considered to be loans by the Portfolio
under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMO interests. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of
principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include (1) U.S. Government securities, (2) securities that (a) are rated (at the time of purchase) by two or more nationally recognized statistical rating organizations ("Rating Organizations") in the two highest rating categories for such securities (e.g., commercial paper rated "A-1" or "A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at the time of purchase) by the only Rating Organization rating the security in one of its two highest rating categories for such securities; (3) short-term obligations and subject to certain SEC requirements, long-term obligations that have remaining maturities of 13 months or less, provided in each instance that such obligations have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer that has been rated in accordance with (2)(a) or (b) above ("comparable obligations"); (4) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to a security satisfying (2) or (3) above; and (5) subject to certain conditions
imposed under Sec rules, obligations guaranteed by persons which meet the requisite rating requirements.
Illiquid Securities. The Portfolio may not invest more than 10% of its net assets in illiquid securities (including, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolio may purchase securities which are not registered under the Securities Act but which may 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 Portfolio's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Portfolio's investment adviser will monitor the liquidity of restricted securities in the Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Investment Limitations
The Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and for reverse repurchase agreements and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, but any such change would be subject to any
applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Portfolio.
1. The Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization, are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name and Address and Age Position with Fund During Past Five Years
------------------------ ------------------ ----------------------
*Arnold M. Reichman - 50 Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Executive Officer
of Counsellors Securities Inc.;
Director/Trustee of various
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Principal Occupation
Name and Address and Age Position with Fund During Past Five Years
------------------------ ------------------ ----------------------
investment companies advised by
Warburg Pincus Asset
Management, Inc.
*Robert Sablowsky - 59 Director Senior Vice President of Fahnestock
110 Wall Street Co., Inc. (a registered
New York, NY 10005 broker-dealer); Prior to October 1996,
Executive Vice President of Gruntal
& Co., Inc. (a registered
broker-dealer)
Francis J. McKay - 61 Director Since 1963, Executive Vice President,
7701 Burholme Avenue Fox Chase Cancer Center (biomedical
Philadelphia, PA 19111 research and medical care).
Marvin E. Sternberg - 63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (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, Gellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
Julian A. Brodsky - 64 Director Director and Vice Chairman, since
1234 Market Street 1969 Comcast Corporation (cable
16th Floor television and communications);
Philadelphia, PA 19107-3723 Director, Comcast Cablevision of
Philadelphia (cable television and
communications) and Nextel
(wireless communications).
Donald van Roden - 73 Director and Chairman of Self-employed businessman. From
1200 Old Mill Lane the Board February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director AAA Mid-Atlantic(auto
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Principal Occupation
Name and Address and Age Position with Fund During Past Five Years
------------------------ ------------------ ----------------------
service); Director, Keystone
Insurance Co.
Edward J. Roach - 74 President and Treasurer Certified Public Accountant; Vice
Suite 100 Chairman of the Board, Fox Chase
Bellevue Park Corporate Cancer Center; Trustee Emeritus,
Center Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata
Wilmington, DE 19809 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 - 59 Secretary Chairman, the law firm of Drinker
Drinker Biddle & Reath LLP Biddle & Reath LLP; Director,
1345 Chestnut Street Rocking Horse Child Care Centers of
Philadelphia, PA 19107-3496 America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser or sub-adviser of the Fund or the Distributor, and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of the Fund and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
-----------------------
Pension or Retirement
Aggregate Benefits Accrued as Estimated Annual
Compensation Part of Fund Benefits Upon
Name of Person/Position from Registrant Expenses Retirement
----------------------- --------------- --------------------- ----------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee) pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolio's adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolio has an investment advisory agreement with BIMC. Although BIMC in turn has a sub-advisory agreement respecting the Portfolio with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreement, PNC Bank would be entitled to receive an annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Portfolio. The advisory agreement relating to the Money Market Portfolio is dated August 16, 1988. Such advisory and sub-advisory agreement are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC for administrative services obligated under the Advisory Agreement) advisory fees as follows:
Fees Paid
**2 (After
**3 waivers and
**1 Portfolio reimbursements) **4 Waivers Reimbursements
------------- -------------- --------- --------------
Money Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- -------------- ------- --------------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
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For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- -------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
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The Portfolio bears all of its own expenses not specifically assumed by BIMC. General expenses of the Fund not readily identifiable as belonging to a portfolio of the Fund are allocated among all investment portfolios by or under the direction of the Fund's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by the
Fund to its directors and officers; (g) organizational costs; (h) fees paid to
the investment adviser, and PFPC; (i) fees and expenses of officers and
directors who are not affiliated with the Portfolios' investment adviser or
Distributor; (j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n)
auditing fees; (o) brokerage fees and commissions; (p) certain of the fees and
expenses of registering and qualifying the Portfolios and their shares for
distribution under federal and state securities laws; (q) expenses of preparing
prospectuses and statements of additional information and distributing annually
to existing shareholders that are not attributable to a particular class of
shares of the Fund; (r) the expense of reports to shareholders, shareholders'
meetings and proxy solicitations that are not attributable to a particular class
of shares of the Fund; (s) fidelity bond and directors' and officers' liability
insurance premiums; (t) the expense of using independent pricing services; and
(u) other expenses which are not expressly assumed by the Portfolio's investment
adviser under its advisory agreement with the Portfolio. The Bedford Class of
the Portfolio pays its own distribution fees and may pay a different share than
other classes of other expenses (excluding advisory and custodial fees) if these
expenses are actually incurred in a different amount by the Bedford Class or if
it receives different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved on July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were approved with respect to the Money Market Portfolio by shareholders of the Portfolio at a special meeting held December 22, 1989, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. The Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. The Advisory Agreement terminates automatically in the event of assignment thereof.
Administration Agreement. BIMC is obligated to render administrative services to the Money Market Portfolio pursuant to the investment advisory agreement. Pursuant to the terms of a Delegation Agreement, dated July 29, 1998,
between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to the Money Market Portfolio. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After waivers and Reimburse-
Portfolio reimbursements) Waivers ments
--------- ------------------ ------- ----------
Money Market Portfolio
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Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the Portfolio (b) holds and transfers portfolio securities on account of the Portfolio, (c) accepts receipts and makes disbursements of money on behalf of the Portfolio, (d) collects and receives all income and other payments and distributions on account of the Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon the Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Bedford Class pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems Shares of the Portfolio, (b) addresses and mails all communications by the Portfolio to record owners of Shares, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of the Shares. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in the Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in the
Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolio. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolio for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 entered into by the Distributor and the Fund on behalf of the Class (the "Distribution Agreement"), and the Plan of Distribution, as amended, for the Class (the "Plan"), which was adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of the Class. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of the Portfolio based on a percentage of the amounts invested by their customers.
The Plan was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to the Plan ("12b-1 Directors").
Among other things, the Plan provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Class under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Class; and (4) while the Plan remains in effect, the selection and
nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plan for the Bear Stearns (Bedford) Money Market Portfolio, in the aggregate amount of $_____. Of that amount, $_____ was paid to dealers with whom PDI had entered into dealer agreements and $_____ was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the plans for the Bear Stearns Money Market Portfolio in the aggregate amount of $_____. Of that amount, $_____ was paid to dealers with whom Counsellors had entered into dealer agreements, and $______ was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plan may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
PORTFOLIO TRANSACTIONS
The Portfolio intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that the Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because the Portfolio intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by the Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolio does not intend to seek profits through short term trading.
Purchases of portfolio securities by the Portfolio are made from dealers, underwriters and issuers; sales are made to dealers and issuers. The Portfolio currently expects to incur any brokerage commission expense on such transactions
because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of the Portfolio to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of the Portfolio, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC 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 Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that the Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for the Portfolio and for other investment accounts managed by BIMC or PNC Bank are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Portfolio is concerned, in other cases it is believed to be beneficial to the Portfolio. The Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or PNC Bank or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing the Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of the Portfolio.
Under the 1940 Act, the Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolio at $1.00 per share. Net asset value per share, the value of an individual share in the Portfolio, is computed by adding the value of the proportionate interest of a class in the Portfolio's cash, securities, and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value per share of each class of the Fund is determined independently of each other class. The Portfolio's "net assets" equal the value of the Portfolio's investments and other securities less its liabilities. The Fund's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of the NYSE (generally 4:00 p.m. Eastern Time) on each Business Day. "Business Day" means each weekday, when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Veterans' Day and Columbus Day.
The Fund calculates the value of the portfolio securities of the Portfolio by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, the Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price the Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for the Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for the Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
The Portfolio will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are
carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
The Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for the Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
The annualized yield for the seven-day period ended August 31, 1998 for the Bedford Class of the Money Market Portfolio, before waivers was as follows:
Tax-Equivalent Yield
Effective (assumes a federal income
Portfolio Yield Yield tax rate of 28%)
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Money Market
Portfolio N/A
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The annualized yield for the seven-day period ended August 31, 1998 for the Bedford Class of the Money Market Portfolio after waivers was as follows:
Tax-Equivalent Yield
Effective (assumes a federal income
Portfolio Yield Yield tax rate of 28%)
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Market Portfolio N/A
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Total return and yield may fluctuate daily and does not provide a basis for determining future returns and yields. Because the returns yields of the Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market
fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of a portfolio's securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which the Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by the Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of the Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of the Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
The Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that the Portfolio generally will be relieved of federal income and excise taxes. If the Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class L Common Stock constitute the Bedford Class, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the
1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of ________________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
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BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
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Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
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BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
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Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
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National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
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Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
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BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
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CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
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C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
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BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
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BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
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BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
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Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
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Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
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Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory or sub-advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BEDFORD MUNICIPAL MONEY MARKET PORTFOLIO
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information
pertaining to a class of shares (the "Class") of The RBB Fund, Inc. representing
interests in the Municipal Money Market Portfolio (the "Portfolio"). This
Statement of Additional Information is not a prospectus, and should be read only
in conjunction with the Bedford Municipal Money Market Portfolio Prospectus of
The RBB Fund, Inc., dated ___________, 1998 (the "Prospectus"). A copy of the
Prospectus may be obtained through the Fund's distributor by calling toll-free
(800) 888-9723. This Statement of Additional Information is dated
______________, 1998.
CONTENTS
Prospectus
Page Page
---- ----------
General.........................................................................
Investment Objectives and Policies..............................................
Directors and Officers..........................................................
Investment Advisory, Distribution and
Servicing Arrangements........................................................
Portfolio Transactions..........................................................
Purchase and Redemption Information.............................................
Valuation of Shares.............................................................
Performance Information.........................................................
Taxes...........................................................................
Additional Information Concerning
Fund Shares...................................................................
Miscellaneous...................................................................
Financial Statements............................................................
Appendix........................................................................ A-1
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to shares of the Class of common stock of the Fund (the "Shares") representing interests in the Municipal Money Market Portfolio of the Fund. The Shares are offered by the Prospectus dated ______________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objective and policies of the Portfolio. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right, and the Portfolio could, for these and other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Portfolio may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Portfolio has such commitments outstanding, the Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or other liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that the Portfolio's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside cash. Because the Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, the Portfolio expects that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When the Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in the Portfolio incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. The Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
The Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, the Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Portfolio will not exceed 1/2 of 1% of the value of the Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
The Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. The Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where the Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by the Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolio's investment adviser pursuant to
guidelines adopted by the Board of Directors. Eligible securities generally include (1) U.S. Government securities; (2) securities that (a) are rated (at the time of purchase) by two or more Rating Organizations (as defined in the Prospectus) in the two highest rating categories for such securities (e.g., commercial paper rated "A-1" or "A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's) or (b) are rated (at the time of purchase) by the only Rating Organization rating the security in one of its two highest rating categories for such securities; (3) short-term obligations and subject to certain SEC requirements; long-term obligations that have remaining maturities of 13 months or less, provided in each instance that such obligations have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer that has been rated in accordance with (2)(a) or (b) above ("comparable obligations"); (4) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to a security satisfying (2) or (3) above; and (5) subject to certain conditions imposed under SEC rules, obligations guaranteed by persons which meet the requisite rating requirements.
Illiquid Securities. The Portfolio may not invest more than 10% of its net assets in illiquid securities, including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act") and securities which are otherwise not readily marketable. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of 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.
The Portfolio may purchase securities which are not registered under the Securities Act but which may 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 Portfolio's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Portfolio's investment adviser will monitor the liquidity of restricted securities in the Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Investment Limitations.
The Portfolio may not:
(1) borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with any such borrowing and then in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a
specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Arnold M. Reichman - 50* Director Senior Managing Director,
466 Lexington Avenue Chief Operating Officer
New York, NY 10017 and Assistant Secretary, Warburg Pincus
Asset Management, Inc.; Director
and Executive Officer of 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 - 61 Director Since 1963, Executive
7701 Burholme Avenue Vice President, Fox
Philadelphia, PA 19111 Chase Cancer Center (biomedical research and
medical care).
Marvin E. Sternberg - 63 Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc. (manufacturer of
dental supplies and precision coated
abrasives); since 1968, Director and
President, Mart MMM, Inc. (formerly
Montgomeryville Merchandise Mart, Inc.) and
Mart PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc.) (shopping centers);
and since 1975, Director and Executive Vice
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
President, Cellucap Mfg. Co., Inc.
(manufacturer of disposable headwear).
Julian A. Brodsky - 64 Director Director, and Vice Chairman
1234 Market Street since 1969, Comcast Corporation
16th Floor (cable television and communications);
Philadelphia, PA 19107-3723 Director, Comcast Cablevision of
Philadelphia (cable television and
communications) and Nextel (wireless
communications).
Donald van Roden - 73 Director and Self-employed businessman. From
1200 Old Mill Lane Chairman of February 1980 to March 1987, Vice Chairman,
Wyomissing, PA 19610 the Board SmithKline Beecham Corporation
(pharmaceuticals); Director, AAA Mid-Atlantic
(auto service); Director, Keystone Insurance
Co.
Edward J. Roach - 74 President and Certified Public
Suite 100 Treasurer Accountant; Vice
Bellevue Park Corporate Chairman of the Board,
Center Fox Chase Cancer
400 Bellevue Parkway Center; Trustee Emeritus,
Wilmington, DE 19809 Pennsylvania School for the 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 - 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP
1345 Chestnut Street Director, Rocking Horse
Philadelphia, PA 19107-3496 Child Care Centers of America, Inc.
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** Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser or sub-adviser of the Fund or the Distributor and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of the Fund and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
Pension or
Retirement
Benefits
Aggregate Accrued as Part Estimated Annual
Compensation from of Fund Benefit Upon
Name of Person/Position Registrant Expenses Retirement
----------------------- ----------------- --------------- ----------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolio's adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the Portfolio's administrator and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolio has an investment advisory agreement with BIMC. Although BIMC in turn has a sub-advisory agreements respecting the Portfolio with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreement, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Portfolio. The advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market $ $ $
Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market $201,095 $1,269,553 $14,921
Portfolio
*2 moved from here; text not shown
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For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market $190,687 $1,218,973 $17,576
Portfolio
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Each Portfolio bears all of its own expenses not specifically assumed by BIMC. General expenses of the Fund not readily identifiable as belonging to a portfolio of the Fund are allocated among all investment portfolios by or under the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by the
Fund to its directors and officers; (g) organizational costs; (h) fees paid to
the investment adviser, and PFPC; (i) fees and expenses of officers and
directors who are not affiliated with the Portfolios' investment adviser or
Distributor; (j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n)
auditing fees; (o) brokerage fees and commissions; (p) certain of the fees and
expenses of registering and qualifying the Portfolios and their shares for
distribution under federal and state securities laws; (q) expenses of preparing
prospectuses and statements of additional information and distributing annually
to existing shareholders that are not attributable to a particular class of
shares of the Fund; (r) the expense of reports to shareholders, shareholders'
meetings and proxy solicitations that are not attributable to a particular class
of shares of the Fund; (s) fidelity bond and directors' and officers' liability
insurance premiums; (t) the expense of using independent pricing services; and
(u) other expenses which are not expressly assumed by the Portfolio's investment
adviser under its advisory agreement with the Portfolio. The Bedford Class of
the Portfolio pays its own distribution fees, and may pay a different share than
other classes of other expenses (excluding advisory and custodial fees) if these
expenses are actually incurred in a different amount by the Bedford Class or if
it receives different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Investment Advisory Agreement was approved by shareholders of the Portfolio at a special meeting held June 10, 1992, as adjourned. The Sub-Advisory Agreement was approved by shareholders of the Portfolio at a special meeting held December 22, 1989. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreement. PFPC serves as the administrator to the Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (the "Administration Agreement.") PFPC has agreed to furnish to the Fund on behalf of the Portfolio statistical and research data, clerical, accounting and bookkeeping services and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or the Portfolio in connection with the performance of the Agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreement, PFPC receives a fee of .10% of the average daily net assets of the Portfolio.
Pursuant to the terms of a Delegation Agreement, dated July 29, 1998, between BIMC and PFPC, However, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Portfolios Fees Paid Waivers Reimbursements ---------- --------- ------- -------------- Municipal Money Market Portfolio $ $ $ |
**3 For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Portfolios Fees Paid Waivers Reimbursements ---------- --------- ------- -------------- Municipal Money Market Portfolio $ 99,071 $ 0 $ 0 |
For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
Portfolios waivers) Waivers Reimbursements
---------- --------- ------- --------------
Municipal Money Market Portfolio $ 67,204 $ 10,146 $ 0
|
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the
Fund's assets pursuant to a custodian agreement dated April 10, 1991, as amended
(the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a)
maintains a separate account or accounts in the name of the Portfolio (b) holds
and transfers portfolio securities on account of the Portfolio, (c) accepts
receipts and makes disbursements of money on behalf of the Portfolio, (d)
collects and receives all income and other payments and distributions on account
of the Portfolio's portfolio securities and (e) makes periodic reports to the
Fund's Board of Directors concerning the Portfolio's operations. PNC Bank is
authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible
for the performance of all its duties under the Custodian Agreement and holds
the Fund harmless from the acts and omissions of any sub-custodian. For its
services to the Fund under the Custodian Agreement, PNC Bank receives a fee
which is calculated based upon the Portfolio's average daily gross assets as
follows: $.25 per $1,000 on the first $50 million of average daily gross assets;
$.20 per $1,000 on the next $50 million of average daily gross assets; and $.15
per $1,000 on average daily gross assets over $100 million, with a minimum
monthly fee of $1,000, exclusive of transaction charges and out-of-pocket
expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Shares pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems Shares, (b) addresses and mails all communications by the Portfolio to record owners of Shares, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of the classes of the Fund. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in the Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in the Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolio.
Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolio for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, (the "Distribution Agreement"), entered into by the Distributor and the Fund on behalf of the Shares, and a Plan of Distribution as amended, for the Shares (the "Plan"), both of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute the Shares. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling Shares of the Portfolio based on a percentage of the amounts invested by their customers.
The Plan was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to the Plan ("12b-1 Directors").
Among other things, the Plan provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Shares under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Shares; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plan for the Bedford Municipal Money Market Portfolio in the aggregate amount of $_____. Of that amount, $_____ was paid to dealers with whom PDI had entered into dealer agreements, and $_____ was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the Plan for the Bedford Municipal Money Market
Portfolio, in the aggregate amount of $_____. Of that amount, $ ______ was paid to dealers with whom Counsellors had entered into dealer agreements, and $______ was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plan by virtue of his respective position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
PORTFOLIO TRANSACTIONS
The Portfolio intends to purchase securities with remaining maturities of 13 months or less, and may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because the Portfolio intends to purchase only securities with remaining maturities of 13 months or less, its portfolio turnover rate will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by the Portfolio, the turnover rate should not adversely affect the Portfolio's net asset value or net income. The Portfolio does not intend to seek profits through short term trading.
Purchases of portfolio securities by the Portfolio are made from dealers, underwriters and issuers; sales are made to dealers and issuers. The Portfolio does not currently expect to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of the Portfolio to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of the Portfolio, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC 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 Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that the Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for the Portfolio and for other investment accounts managed by BIMC are made independently of each other in the light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Portfolio is concerned, in other cases it is believed to be beneficial to the Portfolio. The Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act.
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing the Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of the Portfolio.
Under the 1940 Act, the Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolio at $1.00 per share. Net asset value per share, the value of an individual share in the Portfolio, is computed by adding the value of the proportionate interest of the class in the Portfolio's securities, cash and other assets, deducting actual and accrued liabilities of each class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Portfolio is determined independently of the other classes and the other Portfolios. The Portfolio's "net assets" equal the value of the Portfolio's investments and other securities less its liabilities. The Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each weekday when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed, on weekends and the same holidays as the NYSE as well as Veterans' Day and Columbus Day.
The Fund calculates the value of the portfolio securities of the Portfolio by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the
market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, the Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price the Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for the Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for the Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
The Portfolio will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
The current and effective yields of Shares of the Class are computed using standardized methods required by the SEC. The annualized yield for Shares of the Class is computed by: (a) determining the net change in the value of a hypothetical account having a balance of one Share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The
net change in the value of the account reflects the value of additional Shares purchased with dividends declared and all dividends declared on both the original Share and such additional Shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
The annualized yield for the seven-day period ended August 31, 1998 for the Shares of the Class before waivers was as follows:
Tax-Equivalent
Yield (assumes a
Effective federal income
Portfolio Yield Yield tax rate of 28%)
--------- ----- ----- ----------------
Municipal Money Market Portfolio % % %
|
The annualized yield for the seven-day period ended August 31, 1998 for the Shares of the Class after waivers was as follows:
Tax-Equivalent
Yield (assumes a
Effective federal income
Portfolio Yield Yield tax rate of 28%)
--------- ----- ----- ----------------
Municipal Money Market Portfolio % % %
|
Total return and yield may fluctuate daily and do not provide a basis for determining future returns and yields. Because the yield of Shares of the Class will fluctuate, it cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which the Portfolio invests, are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations
they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by the Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether the Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the return and/or yield of Shares of the Class may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of Shares of the Class may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and to distribute its income to
shareholders each year, so that the Portfolio generally will be relieved of
federal income and excise taxes. If the Portfolio were to fail to so qualify:
(1) the Portfolio would be taxed at regular corporate rates without any
deduction for distributions to shareholders; and (2) shareholders would be taxed
as if they received ordinary dividends, although corporate shareholders could be
eligible for the dividends received deduction. For the Portfolio to pay
tax-exempt dividends for any taxable year, at least 50% of the aggregate value
of the Portfolio's assets at the close of each quarter of the Fund's taxable
year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class M Common Stock constitute the Bedford Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a
meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to the portfolio only if approved by the holders of a majority of the outstanding voting securities of the 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 Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of __________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BEDFORD GOVERNMENT OBLIGATIONS
MONEY MARKET PORTFOLIO
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to a class of Shares (the "Class") of The RBB Fund, Inc. representing interests in the Government Obligations Money Market Portfolio (the "Portfolio"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Bedford Government Obligations Money Market Portfolio Prospectus of The RBB Fund, Inc. dated ____________, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ___________, 1998.
CONTENTS
Prospectus
Page Page
---- ----------
General ..................................................2
Investment Objectives and Policies..........................2
Directors and Officers......................................7
Investment Advisory. Distribution and Servicing
Arrangements..........................................10
Portfolio Transactions.....................................13
Purchase and Redemption Information........................16
Valuation of Shares........................................16
Performance Information ...................................18
Taxes ..................................................19
Additional Information Concerning Fund Shares..............22
Miscellaneous..............................................25
Financial Statements.......................................37
Appendix A................................................A-1
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to shares of the Class of common stock of the Fund (the "Shares") representing interests in the Government Obligations Money Market Portfolio of the Fund. The Shares are offered by the Prospectus dated ____________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objective and policies of the Portfolio. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by the Portfolio pursuant to the Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury bills, notes and bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Short Sales "Against the Box." In a short sale, the Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Repurchase Agreements. The repurchase price under the repurchase agreements
described in the Prospectus generally equals the price paid by the Portfolio
plus interest negotiated on the basis of current short-term rates (which may be
more or less than the rate on the securities underlying the repurchase
agreement). The financial institutions with which the Portfolio 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 Portfolio's adviser or sub-adviser. The Portfolio's adviser or sub-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 Portfolio's
adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or
(ii) the daily amortization of the difference between the purchase price and the
repurchase price specified in the repurchase agreement. The Portfolio's adviser
or sub-adviser will mark to market daily the value of the securities. Securities
subject to repurchase agreements will be held by the Fund's custodian in the
Federal Reserve/Treasury book-entry system or by another authorized securities
depository. Repurchase agreements are considered to be loans by the Portfolio
under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMO interests. The Portfolio does not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date.
Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Portfolio of its portfolio securities as described in the Prospectus, the Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by the Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Illiquid Securities. The Portfolio may not invest more than 10% of its net assets in illiquid securities (including repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. 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.
The Portfolio may purchase securities which are not registered under the Securities Act but which may 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 Portfolio's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in the Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Portfolio's investment adviser will monitor the liquidity of restricted securities in the Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Investment Limitations
The Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300 percent for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets, except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such
borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Act as an underwriter.
4. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral, consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Position with Principal Occupation
Name and Address and Age Fund During Past Five Years
------------------------ ------------- ----------------------
Arnold M. Reichman - 50* Director Senior Managing Director,
466 Lexington Avenue Chief Operating Officer
New York, NY 10017 and Assistant Secretary,
Warburg Pincus Asset
Management, Inc.; Director
and Executive Officer of
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).
|
Position with Principal Occupation
Name and Address and Age Fund During Past Five Years
------------------------ ------------- ----------------------
Francis J. McKay - 61 Director Since 1963, Executive
7701 Burholme Avenue Vice President, Fox Chase
Philadelphia, PA 19111 Cancer Center (biomedical
research and medical
care).
Marvin E. Sternberg - 63 Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc.
(manufacturer of dental
supplies and precision
coated abrasives); since
1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart, Inc.)
and Mart PMM, Inc.
(formerly Pennsauken
Merchandise Mart, Inc.)
(shopping centers); and
since 1975, Director and
Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of
disposable headwear).
Julian A. Brodsky - 64 Director Director and Vice Chairman
1234 Market Street since 1969, Comcast
16th Floor Corporation (cable
Philadelphia, PA 19107-3723 television and
communications); Director,
Comcast Cablevision of
Philadelphia (cable
television and
communications) and Nextel
(wireless communications).
Donald van Roden - 73 Director and Self-employed businessman.
1200 Old Mill Lane Chairman of From February 1980 to
Wyomissing, PA 19610 the Board March 1987, Vice Chairman,
SmithKline Beecham
Corporation
(pharmaceuticals);
Director, AAA Mid-Atlantic
(auto service); Director,
Keystone Insurance Co.
Edward J. Roach - 74 President and Certified Public
Suite 100 Treasurer Accountant; Vice Chairman
Bellevue Park Corporate of the Board, Fox Chase
Center Cancer Center; Trustee
400 Bellevue Parkway Emeritus, Pennsylvania
Wilmington, DE 19809 School for the 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.
-8-
|
Position with Principal Occupation
Name and Address and Age Fund During Past Five Years
------------------------ ------------- ----------------------
Morgan R. Jones - 59 Secretary Chairman, the law firm
Drinker Biddle & Reath LLP of Drinker Biddle & Reath
1345 Chestnut Street LLP; Director, Rocking
Philadelphia, PA 19107-3496 Horse Child Care Centers
of America, Inc.
-------------------------
|
* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of RBB as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser or sub-adviser of the Fund or the Distributor and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of the Fund and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
Pension or
Retirement
Aggregate Benefits Accrued Estimated
Compensation from as Part of Fund Annual Benefits
Name of Person/Position Registrant Expenses Upon Retirement
----------------------- ----------------- ---------------- ---------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
|
On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as PNC Institutional Management Corporation), the Portfolio's adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the Fund's transfer and dividend disbursing agent, and Provident Distributors Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolio has an investment advisory agreement with BIMC. Although BIMC in turn has a sub-advisory agreement respecting the Portfolio with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreement, PNC Bank is entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Portfolio. The advisory agreement relating to the Portfolios is dated August 16, 1988. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Government Obligations
Money Market Portfolio
|
For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Government Obligations
Money Market Portfolio $1,774,123 $647,063 $404,193
|
For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Government Obligations
Money Market Portfolio $780,122 $398,363 $0
|
The Portfolio bears all of its own expenses not specifically assumed by BIMC. General expenses of the Fund not readily identifiable as belonging to a portfolio of the Fund are allocated among all investment portfolios by or under the direction of the Fund's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against the Fund or a portfolio for violation of any law; (d) any extraordinary expenses; (e) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (f) the cost of investment company literature and other publications provided by the Fund to its directors and officers; (g) organizational costs; (h) fees to the investment adviser and PFPC; (i) fees and expenses of officers and directors who are not affiliated with the Portfolios' investment adviser or Distributor; (j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees; (o) brokerage fees and commissions; (p) certain of the fees and expenses of registering and qualifying the Portfolio and its shares for distribution under federal and state securities laws; (q) expenses of preparing prospectuses and statements of additional information and distributing annually to existing shareholders that are not attributable to a particular class of shares of the Fund; (r) the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of the Fund; (s) fidelity bond and directors' and officers' liability insurance premiums; (t) the expense of using independent pricing services; and (u) other expenses which are not expressly assumed by the Portfolio's investment adviser under its advisory agreement with the Portfolio. The Bedford Class of the Portfolio pays its own distribution fees, and may pay a different share than other classes of other expenses (excluding advisory and custodial fees) if these expenses are actually incurred in a different amount by the Bedford Class or if it receives different services.
Under the Advisory Agreements, BIMC and PNC will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved on July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved by shareholders of the Portfolio at a special meeting held December 22, 1989, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Services. BIMC is obligated to render administrative services to the Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of a Delegation Agreement, dated July 29, 1998, between BIMC and PFPC, BIMC has delegated to PFPC its administrative responsibilities to the Portfolio. The Fund pays to PFPC directly the fees accrued for administrative services to those Portfolios.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Government Obligations
Money Market Portfolio
|
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the Portfolio, (b) holds and transfers portfolio securities on account of the Portfolio, (c) accepts receipts and makes disbursements of money on behalf of the Portfolio, (d) collects and receives all income and other payments and distributions on account of the Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning the Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon the Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Shares of the Fund pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems Shares, (b) addresses and mails all communications by the Portfolio to record owners of Shares, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of the classes of the Fund. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in the Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at the annual rate of $17.00 per account in the Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolio. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolio for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, (the "Distribution Agreement") entered into by the Distributor and the Fund on behalf of the Shares, and a Plan of Distribution, as amended, for the Shares (the "Plan"), both of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute the Shares. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling Shares of the Portfolio based on a percentage of the amounts invested by their customers.
The Plan was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to the Plan ("12b-1 Directors").
Among other things, the Plan provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan
will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Shares under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Shares; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the Bedford Government Obligations Money Market Portfolio in the aggregate amount of $ _____, of which amount $_____ was paid to dealers with whom PDI had entered into dealer agreements, and $_____ of which was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the Plan for the Bedford Government Obligations Money Market Portfolio in the aggregate amount of $_____, of which amount $_____ was paid to dealers with whom Counsellors had entered into dealer agreements, and $______ of which was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that the Plan may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plan by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
PORTFOLIO TRANSACTIONS
The Portfolio intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less). Because the Portfolio intends to purchase only securities with remaining maturities of 13 months or less, its portfolio turnover rate will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by the Portfolio, the turnover rate should not adversely affect the Portfolio's net asset value or net income. The Portfolio does not intend to seek profits through short term trading.
Purchases of portfolio securities by the Portfolio are made from dealers, underwriters and issuers; sales are made to dealers and issuers. The Portfolio does not currently expect to incur any brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of the Portfolio to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of the Portfolio, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC 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 Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that the Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for the Portfolio and for other investment accounts managed by BIMC are made independently of each other in the light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Portfolio is concerned, in other cases it is believed to be beneficial to the Portfolio. The Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act.
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing the Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of the Portfolio.
Under the 1940 Act, the Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolio at $1.00 per share. Net asset value per share, the value of an individual share in the Portfolio, is computed by adding the value of the proportionate interest of the class in the Portfolio's cash, securities, and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is determined independently of the other classes of the Fund. The Portfolio's "net assets" equal the value of the Portfolio's investments and other securities less its liabilities. The Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each weekday, when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed on weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE, as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of the Portfolio by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, the Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price the Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for the Portfolio, which include a
review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for the Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
The Portfolio will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
The Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yield for the Portfolio is computed by: (a) determining the net change in the value of a hypothetical account having a balance of one Share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional Shares purchased with dividends declared and all dividends declared on both the original Share and such additional Shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
The annualized yield for the seven-day period ended August 31, 1998 for the Bedford Class of the Portfolio before waivers was as follows:
Tax-Equivalent Yield
(assumes a federal
Effective income tax
Yield Yield rate of 28%)
----- --------- --------------------
N/A
|
The annualized yield for the seven-day period ended August 31, 1998 for the Bedford Class of the Portfolio after waivers was as follows:
Tax-Equivalent Yield
(assumes a federal
Effective income tax
Yield Yield rate of 28%)
----- --------- --------------------
N/A
|
Total return and yield may fluctuate daily and do not provide a basis for determining future returns and yields. Because the return and yield of Shares of the Class will fluctuate, it cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which the Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by the Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether the Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the return and/or yield of Shares of the Class may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of Shares of the Class may be compared to the Donoghue's Money Fund Average, which is an
average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
The Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that the Portfolio generally will be relieved of federal income and excise taxes. If the Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-
Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA
Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class N Common Stock constitute the Bedford Class,
described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to the portfolio only if approved by the holders of a majority of the outstanding voting securities of the 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 Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of _________________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
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BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
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Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
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BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
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Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
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National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
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Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
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BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
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CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
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C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
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BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
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BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
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BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
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Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
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Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
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Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
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Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
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FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
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Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
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BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
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Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
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New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
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Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
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BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
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Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
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State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
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BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
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Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
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Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
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Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
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MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
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BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
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William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
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Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
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Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
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BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
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Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
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Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
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BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
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BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
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Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
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FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
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BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
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Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
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CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
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Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
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Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
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Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
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SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
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Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
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CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
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Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
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Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
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Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
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Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
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N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
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Janis Claflin, Bruce Fetzer and 5.339%
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
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Public Inst. For Social Security 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
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Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
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State Street Bank and Trust Company 8.675%
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
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N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
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U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
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Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
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N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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The John E. Fetzer Institute Inc. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
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Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
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N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Bank of America NT & SA 17.438%
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
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The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
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BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
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US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
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Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
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Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
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Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
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Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
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BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
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Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
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The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
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John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
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MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
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ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
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Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
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U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
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BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
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Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
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BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
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Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
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The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
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The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
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BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
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Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
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BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
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Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
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David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
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BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
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Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
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SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
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SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
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Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
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Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
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As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in
a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities; obligations exposed to severe prepayment risk--such as interest-only or principal-only mortgage securities and obligations with unusually risky interest terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BEDFORD FAMILY
Money Market Portfolio,
Municipal Money Market Portfolio and
Government Obligations Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of three classes (the "Bedford Shares") each representing interests in one of three investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Bedford Family Prospectus of the Fund, dated ____________, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated __________, 1998.
CONTENTS
Prospectus
Page Page
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General......................................................................
Investment Objectives and Policies...........................................
Directors and Officers.......................................................
Investment Advisory, Distribution and Servicing Arrangements.................
Portfolio Transactions.......................................................
Purchase and Redemption Information..........................................
Valuation of Shares..........................................................
Performance Information......................................................
Taxes........................................................................
Additional Information Concerning Fund Shares................................
Miscellaneous................................................................
Financial Statements.........................................................
Appendix A...................................................................A-1
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to three classes of shares (the "Bedford Classes") representing interests in three of the investment portfolios (the "Portfolios") of the Fund: the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio. The Bedford Classes are offered by the Prospectus dated _________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market Portfolio or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market or the Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to disposeof variable or floating rate notes if the
issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market and Municipal Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market or Municipal Money Market Portfolios has such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that a Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because a Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, it is expected that commitments to purchase "when issued" securities will not exceed 25% of the value of a Portfolio's total assets absent unusual market conditions. When either the Money Market Portfolio or Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market Portfolio and Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio or Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio and Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio and Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio and Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. These Portfolios' reliance upon the credit of these
dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio and Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
Short Sales "Against the Box": In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark to market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the
Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market and Government Obligations Portfolios may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMO interests. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of
CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities, (2) securities that
(a) are rated (at the time of purchase) by two or more Rating Organizations (as
defined in the Prospectus) in the two highest rating categories for such
securities (e.g., commercial paper rated "A-1" or "A-2" by S&P, or rated
"Prime-1" or "Prime-2" by Moody's), or (b) are rated (at the time of purchase)
by the only Rating Organization rating the security in one of its two highest
rating categories for such securities; (3) short-term obligations and subject to
certain SEC requirements; long-term obligations that have remaining maturities
of 13 months or less, provided in each instance that such obligations have no
short-term rating and are comparable in priority and security to a class of
short-term obligations of the issuer that has been rated in accordance with
(2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to a security satisfying (2) or (3) above; and (5) subject to certain conditions imposed under SEC rules, obligations guaranteed by persons which meet the requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio and the Government Obligations Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the
investment 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).
Investment Limitations
Money Market Portfolio and Municipal Money Market Portfolio. Neither the Money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the
industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization (as defined in the Prospectus), are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise Price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Act as an underwriter.
4. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name and Address and Age Position with Fund During Past Five Years
------------------------ ------------------ ----------------------
Arnold M. Reichman - 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and
Executive Officer of Counsellors
Securities Inc.; Director/Trustee of
various investment companies advised
by Warburg Pincus Asset Management,
Inc.
Robert Sablowsky - 59* Director Senior Vice President, Fahnestock
110 Wall Street Co., Inc. (a registered
New York, NY 10005 broker-dealer); Prior to October
1996, Executive Vice President of
Gruntal & Co., Inc. (a registered
broker-dealer.
Francis J. McKay - 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer Center
Philadelphia, PA 19111 (Biomedical research and medical
care).
Marvin E. Sternberg - 63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (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
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Principal Occupation
Name and Address and Age Position with Fund During Past Five Years
------------------------ ------------------ ----------------------
Executive Vice President, Cellucap
Mfg. Co., Inc. (manufacturer of
disposable headwear).
Julian A. Brodsky - 64 Director Director and Vice Chairman since
1234 Market Street 1969, Comcast Corporation (cable
16th Floor television and communications);
Philadelphia, PA 19107-3723 Director, Comcast Cablevision of
Philadelphia (cable television and
communications) and Nextel (wireless
communications).
Donald van Roden - 73 Director and Chairman Self-employed businessman. From
1200 Old Mill Lane of the Board February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.
Edward J. Roach - 74 President and Treasurer Certified Public Accountant;
Suite 100 Vice Chairman of the Board,
Bellevue Park Fox Chase Cancer Center;
Corporate Center Trustee Emeritus,
400 Bellevue Parkway Pennsylvania School for the Deaf;
Wilmington, DE 19809 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.
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Principal Occupation
Name and Address and Age Position with Fund During Past Five Years
------------------------ ------------------ ----------------------
Morgan R. Jones - 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse
Philadelphia, PA 19107-3496 Child Care Centers of
America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act by virtue of his respective position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser or sub-adviser of the Fund or the Distributor and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 additional fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of the Fund and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
Pension or
Aggregate Retirement Benefits Estimated Annual
Compensation Accrued as Part Benefits Upon
Name of Person/Position from Registrant of Fund Expenses Retirement
----------------------- --------------- ------------------- ----------------
Julian A. Brodsky, $____ N/A N/A
Director
Francis J. McKay, $____ N/A N/A
Director
Arnold M. Reichman, $____ N/A N/A
Director
Robert Sablowsky, $____ N/A N/A
Director
Marvin E. Sternberg, $____ N/A N/A
Director
Donald van Roden, $____ N/A N/A
Director and Chairman
|
On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee) pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC
Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the Municipal Money Market Portfolio's administrator and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreement, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market, Municipal Money Market and Government Obligations Portfolios. The advisory agreements relating to the Money Market and Government Obligations Money Market Portfolios are dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is date November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market and the Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
*2 moved from here; text not shown
Fees Paid
(After
waivers and Reimburse-
Portfolios reimbursements) Waivers ments
---------- --------------- ------- ----------
Money Market Portfolio
Municipal Money Market Portfolio
Government Obligations Money
Market Portfolio
|
*1 moved from here; text not shown
For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and Reimburse-
Portfolios reimbursements) Waivers ments
---------- --------------- ------- ----------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
Municipal Money Market Portfolio $201,095 $1,269,553 $14,921
Government Obligations Money
Market Portfolio $1,774,123 $647,063 $404,193
|
**(2) For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and Reimburse-
Portfolios reimbursements) Waivers ments
---------- --------------- ------- ----------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money Market Portfolio $190,687 $1,218,973 $17,576
Government Obligations Money
Market Portfolio $1,638,622 $671,811 $406,954
|
Each Portfolio bears all of its own expenses not specifically assumed by BIMC. General expenses of the Fund not readily identifiable as belonging to a portfolio of the Fund are
allocated among all investment portfolios by or under the direction of the Fund's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against the Fund or a portfolio for violation of any law; (d) any extraordinary expenses; (e) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (f) the cost of investment company literature and other publications provided by the Fund to its directors and officers; (g) organizational costs; (h) fees paid to the investment adviser and PFPC; (i) fees and expenses of officers and directors who are not affiliated with the Portfolios' investment adviser or Distributor; (j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees; (o) brokerage fees and commissions; (p) certain of the fees and expenses of registering and qualifying the Portfolios and their shares for distribution under federal and state securities laws; (q) expenses of preparing prospectuses and statements of additional information and distributing annually to existing shareholders that are not attributable to a particular class of shares of the Fund; (r) the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of the Fund; (s) fidelity bond and directors' and officers' liability insurance premiums; (t) the expense of using independent pricing services; and (u) other expenses which are not expressly assumed by the Portfolio's investment adviser under its advisory agreement with the Portfolio. The Bedford Class of the Fund pays its own distribution fees, and may pay a different share than other classes of other expenses (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by the Bedford Class or if it receives different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC and PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved on July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Money Market and Government Obligations Money Market Portfolios by the shareholders of each Portfolio at a special meeting held December 22, 1989, as adjourned. The Investment Advisory Agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned. The Sub-Advisory Agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreement. PFPC serves as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (the "Administration Agreement"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or the Portfolio in connection with the performance of the Agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreement, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market Portfolio.
BIMC is obligated to render administrative services to the Money Market and Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of a Delegation Agreement, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After waivers and Reimburse-
Portfolio reimbursements) Waivers ments
--------- ------------------- ------- ----------
Money Market Portfolio
Municipal Money Market Portfolio
Government Obligations Money Market
Portfolio
|
**(3) For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After waivers and Reimburse-
Portfolio reimbursements) Waivers ments
--------- ------------------ ------- ----------
Municipal Money Market Portfolio $99,071 $0 $0
|
For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- ------------------ ------- --------------
Municipal Money Market Portfolio $67,204 $0 $0
|
*3 moved from here; text not shown
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Bedford Class pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems Shares, (b) addresses and mails all communications by each Portfolio to record owners of Shares of each such Portfolio, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Portfolio. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank
Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, entered into by the Distributor and the Fund on behalf of each of the Bedford Classes (the "Distribution Agreement"), and separate Plans of Distribution, as amended, for each of the Bedford Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Bedford Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreements, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provide that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plans and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plans will continue in effect only so long as they are approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Bedford Class under the Plans shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Bedford Class; and (4) while the Plans remain in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the Bedford Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio in the aggregate amounts of $_____, $_____, and $_____, respectively. Of those amounts, $_____, $_____, and $____, respectively, was paid to dealers with whom PDI had entered into dealer agreements, and $_____, $______, and $_____, respectively, was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the plans for the Bedford Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio in the aggregate amounts of $_____, $_____, and $______, respectively. Of these amounts, $______, $______, and $_____, was paid to dealers with whom Counsellors had entered into dealer agreements, and $______, $______, and $______, respectively, was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Money Market Portfolio and the Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities
purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of the class in the Portfolio'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. The net asset value of each class of a Portfolio is determined independently of the other classes and the other Portfolios. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. Each Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each weekday when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Veterans' Day and Columbus Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When
such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
The annualized yield for the seven (7) day period ended August 31, 1998 for the Bedford Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio before waivers was as follows:
Tax-Equivalent Yield
Effective (assumes a federal income
Portfolio Yield Yield tax rate of 28%)
---------- ----- --------- ---------------------------
Money Market N/A
Municipal Money Market
Government Obligations Money Market N/A
|
The annualized yield for the seven (7) day period ended August 31, 1998 for the Bedford Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio after waivers was as follows:
Tax-Equivalent Yield
Effective (assumes a federal income
Portfolio Yield Yield tax rate of 28%)
---------- ----- --------- ---------------------------
Money Market N/A
Municipal Money Market
Government Obligations Money Market N/A
|
Total return and yield may fluctuate daily and does not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the
method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of the Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class L Common Stock, Class M Common Stock and Class N Common Stock constitute the Bedford Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Portfolios; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as
otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of ___________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
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BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
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Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
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BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
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Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
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National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
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Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
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BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
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CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
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C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
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BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
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BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
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BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
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Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
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Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
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Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
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Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
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FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
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Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
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BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
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Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
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New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
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Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
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BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
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Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
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State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
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BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
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Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
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Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
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Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
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MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
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BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
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William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
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Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
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Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
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BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
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Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
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Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
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BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
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BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
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Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
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FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
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BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
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Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
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CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
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Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
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Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
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Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
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SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
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Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
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CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
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Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
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Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
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Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
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Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
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N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
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Janis Claflin, Bruce Fetzer and 5.339%
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
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Public Inst. For Social Security 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
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Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
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State Street Bank and Trust Company 8.675%
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
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N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
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U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
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Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
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N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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The John E. Fetzer Institute Inc. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
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Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
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N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Bank of America NT & SA 17.438%
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
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The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
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BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
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US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
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Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
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Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
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Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
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Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
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BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
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Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
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The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
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John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
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MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
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ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
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Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
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U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
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BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
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Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
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BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
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Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
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The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
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The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
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BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
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Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
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BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
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Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
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Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
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David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
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BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
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Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
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SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
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SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
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Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
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Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
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As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations
of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"CCC", "CC", and "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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BEDFORD FAMILY
Money Market Portfolio,
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information
pertaining to shares of four classes (the "Bedford Shares") representing
interests in four investment portfolios (the "Portfolios") of The RBB Fund, Inc.
(the "Fund"): the Money Market Portfolio, the Municipal Money Market Portfolio,
the Government Obligations Money Market Portfolio and the New York Municipal
Money Market Portfolio. This Statement of Additional Information is not a
prospectus, and should be read only in conjunction with the Bedford Family
Prospectus of the Fund dated __________, 1998 (the "Prospectus"). A copy of the
Prospectus may be obtained through the Fund's distributor by calling toll-free
(800) 888-9723. This Statement of Additional Information is dated _____________,
1998.
CONTENTS
Prospectus
Page Page
---- ----
General...................................
Investment Objectives and Policies........
Directors and Officers.....
Investment Advisory, Distribution and
Servicing Arrangements..................
Portfolio Transactions....................
Purchase and Redemption Information.......
Valuation of Shares.......................
Performance Information...................
Taxes.....................................
Additional Information Concerning Fund
Shares..................................
Miscellaneous.............................
Financial Statements......................
Appendix..................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to four classes of shares (the "Bedford Classes") representing interests in four investment portfolios (the "Portfolios") of the Fund: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Bedford Classes are offered by the Prospectus dated ___________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market Portfolio or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market, Municipal Money Market or New York Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. The absence of an active secondary
market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right, and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market, Municipal Money Market and New York Municipal Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market, Municipal Money Market or New York Municipal Money Market Portfolios has such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that a Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because a Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, it is expected that commitments to purchase "when-issued" securities will not exceed 25% of the value of a Portfolio's total assets absent unusual market conditions. When the Money Market, Municipal Money Market or the New York Municipal Money Market Portfolios engage in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market, Municipal Money Market and New York Municipal Money Market Portfolios may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio, Municipal Money Market Portfolio or New York Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing
the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. These Portfolios' reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's adviser or
sub-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 either (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark to market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market and Government Obligations Portfolios may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities
(the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMO interests. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by
such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities, (2) securities that
(a) are rated (at the time of purchase) by two or more nationally recognized
statistical rating organizations ("Rating Organizations") in the two highest
rating categories for such securities (e.g., commercial paper rated "A-1" or
"A-2," by Standard & Poor's Ratings Services ("S&P"), or rated "Prime-1" or
"Prime-2" by Moody's Investor's Service, Inc. ("Moody's")), or (b) are rated (at
the time of purchase) by the only Rating Organization rating the security in one
of its two highest rating categories for such securities; (3) short-term
obligations and subject to certain SEC requirements; long-term obligations that
have remaining maturities of 13 months or less, provided in each instance that
such obligations have no short-term rating and are comparable in priority and
security to a class of short-term obligations of the issuer that has been rated
in accordance with (2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have
comparable obligations rated by a Rating Organization ("Unrated Securities"),
provided that such securities are determined to be of comparable quality to a
security satisfying (2) or (3) above; and (5) subject to certain conditions
imposed under SEC rules, obligations guaranteed by persons which meet the
requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of 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.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Special Considerations Relating To New York Municipal Obligations. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional Information. The accuracy and completeness of the information contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its
excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies.
The forecast of the State's economy shows continued expansion during the 1998 calendar year, with employment growth gradually slowing as the year progresses. The financial and business service sectors are expected to continue to do well, while employment in the manufacturing and government sectors will post only small, if any, declines. On an average annual basis, the employment growth rate in the State is expected to be higher than in 1997 and the unemployment rate is expected to drop further to 6.1 percent. Personal income is expected to record moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the previous year as the recent robust growth in bonus payments moderates.
There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998-99 budget process. Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than-projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund spending offsets, and other actions necessary to bring projected disbursements and receipts into balance.
Other actions taken in the 1997-98 adopted budget add further pressure to future budget balance in the State. For example, the fiscal effects of tax reductions adopted in the 1997-98 budget are projected to grow more substantially beyond the 1998-99 fiscal year, with incremental costs averaging in excess of $1.3 billion annually over the last three years of the tax reduction program. These incremental costs reflect the phase-in of State-funded school property tax and local income tax relief, the phase-out of the assessments on medical providers, and reductions in estate and gift levies, utility gross receipts taxes, and the State sales tax on clothing. The full annual cost of the enacted tax reduction package is estimated at approximately $4.8 billion when fully effective in State fiscal year 2001-02. In addition, the 1997-98 budget included multi-year commitments for school aid and pre-kindergarten early learning programs which could add as much as $1.4 billion in costs when fully annualized in fiscal year 2001-02. These spending commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the 2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998-99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the School Tax Relief Program ("STAR"), expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million available for future needs, a balance of $400 million in the Tax Stabilization Reserve
Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF is used to finance various legislative and executive initiatives. The CRF provides resource to help finance any extraordinary litigation costs during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1999 to 1998. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $62 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent.
**1 The economic and financial condition of the State may be affected by various financial, social, economic and political factors. Those factors can be very complex, may vary from fiscal year to fiscal year, and are frequently the result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the federal government, that are not under the control of the State. In addition, the financial plan is based upon forecasts of national and State economic activity. Economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. Actual results, however, could differ materially and adversely from the projections set forth in a financial plan, and those projections may be changed materially and adversely from time to time.
**2 In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the Division of Budget believes it could take similar actions should variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes.
The State ended its 1997-98 fiscal year in balance on a cash basis, with a General Fund cash surplus as reported by DOB of approximately $2.04 billion. The cash surplus was derived primarily from higher-than-anticipated receipts and lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205 million from the prior fiscal year. The balance is held in three accounts within the General Fund: the Tax Stabilization Reserve Fund, the Contingency Reserve Fund and the Community Projects Fund. The TSRF closing balance was $400 million, following a required deposit of $15 million (repaying a transfer made in 1991-92) and an extraordinary deposit of $68 million made from the 1997-98 surplus. The CRF closing balance was $68 million, following a $27 million deposit from the surplus. The CPF, which finances legislative initiatives, closed the fiscal year with a balance of $170 million, an increase of $95 million. The General Fund closing balance did not include $2.39 billion in the tax refund reserve account, of which $521 million was made available as a result of the Local Government Assistance Corporation ("LGAC") financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year (including net tax refund reserve account activity) totaled $34.55 billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97. General Fund disbursements and transfers to other funds were $34.35 billion, an annual increase of $1.45 billion or 4.41 percent.
Debt Limits and Outstanding Debt. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general obligation borrowing (i.e., borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State.
The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms, lease-purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual-obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. The State does not anticipate that it will be called upon to make any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("S&P") reduced its ratings on the State's general obligation bonds from A to A- and, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, S&P revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget, will be released on or before July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year.
The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated that approximately $191 million will be issued to finance agency equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems.
Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was released with the 1998-99 Executive Budget on January 20, 1998. As a part of that Plan, changes were proposed to the State's 1997-98 borrowing plan, including: the delay in the issuance of COPs to finance welfare information systems until 1998-99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to
maintain proper housing; (4) alleged responsibility of New York State officials to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates; (6) challenges to the constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non-Indian consumers on Indian reservations; (8) a challenge to the constitutionality of Clean Water/Clean Air Bond Act; and (9) a challenge to the Governor's application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1997-98 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short-term notes to the public again until 1979. In 1975, S&P suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications.
Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. As of June 30, 1997, MAC had outstanding an aggregate of approximately $4.267 billion of
its bonds. MAC is authorized to issue bonds and notes to refund its outstanding bonds and notes and to fund certain reserves, without limitation as to principal amount, and to finance certain capital commitments to the Transit Authority and the New York City School Construction Authority through the 1997 fiscal year in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The
1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-987 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the General Fund, primarily as a result of the use of the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million.
Although the City has maintained balanced budgets in each of its last seventeen fiscal years and is projected to achieve balanced operating results for the 1998 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's indebtedness within the forecast level of the constitutional restrictions on the amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the
constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's current financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to undertake only approximately $1.4 billion of seasonal financing. The City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years.
Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary deficits that resulted in the establishment of a Supervisory Board for the City of Troy in 1994. The Supervisory Board's powers were increased in 1995, when Troy MAC was created to help Troy avoid default on certain obligations. The legislation creating Troy MAC prohibits the city of Troy from seeking federal bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities are scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional $21 million will be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. Twenty-one localities had outstanding indebtedness for deficit financing at the close of their fiscal year ending in 1996.
From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future.
Year 2000 Compliance. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's
mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result.
Investment Limitations.
Money Market Portfolio and Municipal Money Market Portfolio. Neither the Money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, or hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization (as defined in the Prospectus), are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, or hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Act as an underwriter.
4. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may
lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, or hypothecate any of its assets except in connection with such borrowings and then in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(5) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts;
(7) invest in oil, gas or mineral exploration or development programs;
(8) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(10) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the New York Municipal Money Market Portfolio may not (i) under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax and does not constitute an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments
issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, the Portfolio will not purchase the securities of any issuer if as a result more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer, except that (a) up to 50% of the value of the Portfolio's assets may be invested without regard to this 5% limitation, provided that no more than 25% of the value of the Portfolio's assets are invested in the securities of any one issuer and (b) this 5% limitation does not apply to securities issued or guaranteed by the U.S. Government, or its agencies or instrumentalities. For purposes of this limitation, a security is considered to be issued by the governmental entity (or entities) whose assets and revenues back the security, or, with respect to a private activity bond that is backed only by the assets and revenues of a non-governmental user, by such non-governmental user. In certain circumstances, the guarantor of a guaranteed security may also be considered to be an issuer in connection with such guarantee. This investment policy is not fundamental and may be changed by the Board of Directors without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name and Address and Age Position with Fund During Past Five Years
------------------------ ------------------ ----------------------
Arnold M. Reichman - 50* 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
of 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 - 61 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,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc.
(manufacturer of dental
supplies and precision coated
abrasives); since 1968,
Director and President, Mart
MMM, Inc. (formerly
Montgomeryville
Merchandise Mart Inc.) and
Mart PMM, Inc. (formerly
Pennsauken Merchandise
Mart, Inc.) (shopping
centers); and since 1975,
Director and Executive Vice
President, Cellucap Mfg. Co.,
Inc. (manufacturer of
disposable headwear).
-35-
|
Julian A. Brodsky - 64 Director Director, and Vice Chairman
1234 Market Street since 1969; Comcast
16th Floor Corporation; (cable television
Philadelphia, PA 19107-3723 and communications);
Director, Comcast Cablevision of
Philadelphia (cable television
and communications) and Nextel
(wireless communications).
Donald van Roden - 73 Director and Chairman of the Self-employed businessman.
1200 Old Mill Lane Board From February 1980 to
Wyomissing, PA 19610 March 1987, Vice Chairman,
SmithKline Beecham Corporation
(pharmaceuticals); Director, AAA
Mid-Atlantic (auto service);
Director, Keystone Insurance Co.
Edward J. Roach - 74 President and Treasurer Certified Public Accountant;
Suite 100 Vice Chairman of the Board,
Bellevue Park Corporate Fox Chase Cancer 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 - 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse
Philadelphia, PA 19107-3496 Child Care Centers of
America, Inc.
|
Messrs. McKay, Sternberg and Brodsky are members of the Audit Committee of the Board of Directors. The Audit Committee, among other things, reviews results of the annual audit and recommends to the Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser or sub-adviser of the Fund or the Distributor, and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of the Fund and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Pension or Retirement
Benefits Accrued As Estimated Annual
Aggregate Compensation Part of Fund Benefits Upon
Name of Person/Position from Registrant Expenses Retirement
----------------------- --------------- -------- ----------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A **3 = N/A
Director and Chairman
|
On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian ("PFPC"), the administrator to the Municipal Money Market and New York Municipal Money Market
Portfolios and the Fund's transfer and dividend disbursing agent, and Provident Distributors Inc. (the "Distributor"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios (except the New York Municipal Money Market Portfolio) with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market, Municipal Money Market and Government Obligations Portfolios. The advisory agreements relating to the Money Market and Government Obligations Money Market Portfolios are each dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is dated November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market and Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Money Market Portfolio
Municipal Money
Market Portfolio
Government Obligations
Money Market Portfolio
New York Municipal
Money Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
Municipal Money Market $ 201,095 $1,269,553 $ 14,921
Portfolio
Government Obligations $1,774,123 $ 647,063 $404,193
Money Market Portfolio
New York Municipal $ 21,831 $ 324,917 $ 0
Money Market Portfolio
|
For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money Market $ 190,687 $1,218,973 $ 17,576
Portfolio
Government Obligations $1,638,622 $ 671,811 $406,954
Money Market Portfolio
New York Municipal Money $ 2,709 $ 268,017 $ 0
Market Portfolio
|
Each Portfolio bears all of its own expenses not specifically assumed by
BIMC. General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by the
Fund to its directors and officers; (g) organizational costs; (h) fees paid to
the investment adviser and PFPC; (i) fees and expenses of officers and directors
who are not affiliated with the Portfolios' investment adviser or Distributor;
(j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees;
(o) brokerage fees and commissions; (p) certain of the fees and expenses of
registering and qualifying the Portfolios and their shares for distribution
under federal and state securities laws; (q) expenses of preparing prospectuses
and statements of additional information and distributing annually to existing
shareholders that are not attributable to a particular class of shares of the
Fund; (r) the expense of reports to shareholders, shareholders' meetings and
proxy solicitations that are not attributable to a particular class of shares of
the Fund; (s) fidelity bond and directors' and officers' liability insurance
premiums; (t) the expense of using independent pricing services; and (u) other
expenses which are not expressly assumed by the Portfolio's investment adviser
under its advisory agreement with the Portfolio. The Bedford Classes of the Fund
pays their own distribution fees, and may pay a different share than other
classes of the Fund (excluding advisory and custodial fees) if those expenses
are actually incurred in a different amount by the Bedford Classes or if they
receive different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Money Market and Government Obligations Money Market Portfolios by the shareholders of each Portfolio at a special meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned. The Advisory Agreement was approved with respect to the New York Municipal Money Market Portfolio by the Portfolio's shareholders at a special meeting of shareholders held December 22,
1989. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the New York Municipal Money Market Portfolio pursuant to an Administration Agreement dated November 5, 1991 and as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (together, the "Administration Agreements"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market and New York Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreements, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market and New York Municipal Money Market Portfolios.
BIMC is obligated to render administrative services to the Money Market and Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of Delegation Agreements, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio
New York Municipal Money Market
Portfolio
Money Market Portfolio
Government Obligations Money
Market Portfolio
|
For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid (After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market $448,548 $0 $0
New York Municipal Money $ 99,071 $0 $0
Market Portfolio
|
For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid (After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $428,209 $ 0 $0
New York Municipal Money $ 67,204 $10,146 $0
Market Portfolio
|
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as
amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a)
maintains a separate account or accounts in the name of each Portfolio, (b)
holds and transfers portfolio securities on account of each Portfolio, (c)
accepts receipts and makes disbursements of money on behalf of each Portfolio,
(d) collects and receives all income and other payments and distributions on
account of each Portfolio's portfolio securities and (e) makes periodic reports
to the Fund's Board of Directors concerning each Portfolio's operations. PNC
Bank is authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible
for the performance of all its duties under the Custodian Agreement and holds
the Fund harmless from the acts and omissions of any sub-custodian. For its
services to the Fund under the Custodian Agreement, PNC Bank receives a fee
which is calculated based upon each Portfolio's average daily gross assets as
follows: $.25 per $1,000 on the first $50 million of average daily gross assets;
$.20 per $1,000 on the next $50 million of average daily gross assets; and $.15
per $1,000 on average daily gross assets over $100 million, with a minimum
monthly fee of $1,000 per Portfolio, exclusive of transaction charges and
out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Bedford Classes pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of each of the Bedford Classes, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Bedford Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket, expenses, and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, and supplements entered into by the Distributor and
the Fund on behalf of each of the Bedford Classes, (the "Distribution Agreement") and separate Plans of Distribution, as amended, for each of the Bedford Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Bedford Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreements, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provide that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plans and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plans will continue in effect only so long as they are approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Bedford Class under the Plans shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Bedford Class; and (4) while the Plans remain in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the Bedford Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Obligations Portfolio in the aggregate amounts of $_____, $_____, $_____, and $_____, respectively. Of those amounts $_____, $_____, $_____, and $____, respectively, was paid to dealers with whom PDI had entered into dealer agreements, and $_____, $_____, $______, and $_____, respectively, was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the plans for the Bedford Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio in the aggregate amounts of $_____, $_____, $_____, and $______,
respectively. Of these amounts, $_____, $______, $______, and $_____, was paid to dealers with whom Counsellors had entered into dealer agreements, and $______, $______, $______, and $______, respectively, was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his respective position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolio held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of the class in the Portfolio'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. The net asset value of each class of the Fund is determined independently of the other classes. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. Each Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each weekday when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a
straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value
of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
The annualized yield for the seven-day period ended August 31, 1998 for the Bedford Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio before waivers was as follows:
Tax-Equivalent Yield
(assumes a federal
Effective income
Portfolio Yield Yield tax rate of 28%)
--------- ----- ----- ----------------
Money Market
Municipal Money Market
Government Obligations Money
Market
New York Municipal Money Market
|
The annualized yield for the seven-day period ended August 31, 1998 for The Bedford Classes of the Money Market, Municipal Money Market, Government Obligations Money Market Portfolio and the New York Money Market Portfolio after waivers was as follows:
Tax-Equivalent Yield
(assumes a federal
Effective income
Portfolio Yield Yield tax rate of 28%)
--------- ----- ----- ----------------
Money Market
Municipal Money Market
Government Obligations Money
Market
New York Municipal Money Market
|
Yield may fluctuate daily and does not provide a basis for determining future yields. Because the yields of each Portfolio will fluctuate, they cannot be compared with yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of such Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class L Common Stock, Class M Common Stock, Class N Common Stock and Class O Common Stock constitute the Bedford Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of ____________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believes they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it
is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
0 Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
CASH PRESERVATION PORTFOLIOS
Money Market Portfolio and
Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of two classes (the "Cash Preservation Shares") representing interests in two investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Money Market Portfolio and the Municipal Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Cash Preservation Shares Prospectus of the Fund, dated _______________, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ______________, 1998.
CONTENTS
General.........................................................
Investment Objectives and Policies..............................
Directors and Officers..........................................
Investment Advisory, Distribution and
Servicing Arrangements...................................
Portfolio Transactions..........................................
Purchase and Redemption Information.............................
Valuation of Shares.............................................
Performance Information.........................................
Taxes .........................................................
Additional Information Concerning
Fund Shares..............................................
Miscellaneous...................................................
Financial Statements............................................
Appendix A......................................................
No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to two classes of shares (the "Cash Preservation Classes") representing interests in two of the investment portfolios (the "Portfolios") of the Fund: the Money Market Portfolio and the Municipal Money Market Portfolio. The Cash Preservation Classes are offered by the Prospectus dated ______________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market Portfolio or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market or the Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a
Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right, and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market and Municipal Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market or Municipal Money Market Portfolios has such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian cash or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that a Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because a Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, it is expected that commitments to purchase "when-issued" securities will not exceed 25% of the value of a Portfolio's total assets absent unusual market conditions. When either the Money Market Portfolio or Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market Portfolio and Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio or Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio and Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio and Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio and Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. These Portfolios' reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio and Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is issued in reliance on the "private placement" exemption from registration which is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section 4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 Portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's adviser or sub-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 (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark-to-market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities; (2) securities that
(a) are rated (at the time of purchase) by two or more nationally recognized
statistical rating organizations ("Rating Organizations") in the two highest
rating categories for such securities (e.g., commercial paper rated "A-1" or
"A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's) or (b) are rated (at
the time of purchase) by the only Rating Organization rating the security in one
of its two highest rating categories for such securities; (3) short-term
obligations and subject to certain SEC requirements, long-term obligations that
have remaining maturities of 13 months or less, provided in each instance that
such obligations have no short-term rating and are comparable in priority and
security to a class of short-term obligations of the issuer that has been rated
in accordance with (2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have
comparable obligations rated by a Rating Organization ("Unrated Securities"),
provided that such securities are determined to be of comparable quality to a
security satisfying (2) or (3) above; and (5) subject to certain conditions imposed under SEC rules, obligations guaranteed by persons which meet the requisite rating requirements.
Illiquid Securities. Neither Portfolio may invest more than 10% of its net assets in illiquid securities (including with respect to the Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Investment Limitations
Neither Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization (as defined in the Prospectus), are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization are rated by such Rating Organization, in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinion relating to the validity of Municipal Obligations and to the exemption of interest thereof from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Arnold M. Reichman - 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and
Executive Officer of 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).
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Francis J. McKay - 61 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 Industries,
Bryn Mawr, PA 19010 Inc. (manufacturer of dental
supplies and precision coated
abrasives); since 1968, Director
and President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart Inc.) and Mart
PMM, Inc. (formerly
Pennsauken Merchandise Mart,
Inc.) (shopping centers); and
since 1975, Director and
Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
Julian A. Brodsky - 64 Director Director and Vice Chairman
1234 Market Street since 1969, Comcast
16th Floor Corporation (cable television and
Philadelphia, PA 19107-3723 communications); Director,
Comcast Cablevision of
Philadelphia (cable television
and communications) and Nextel
(wireless communications).
Donald van Roden - 73 Director and Self-employed businessman.
1200 Old Mill Lane Chairman of the From February 1980 to March
Wyomissing, PA 19610 Board 1987, Vice Chairman,
SmithKline Beecham Corporation
(pharmaceuticals); Director, AAA
Mid-Atlantic (auto service);
Director, Keystone Insurance Co.
Edward J. Roach - 74 President and Certified Public Accountant;
Suite 100 Treasurer Vice Chairman of the Board,
Bellevue Park Corporate Fox Chase Cancer Center;
Center Trustee Emeritus, Pennsylvania
400 Bellevue Parkway School for the Deaf; Trustee
Wilmington, DE 19809 Emeritus, Immaculata College;
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
President or Vice President and
Treasurer of various investment
companies advised by BlackRock
Institutional Management
Corporation; Director, The
Bradford Funds, Inc.
Morgan R. Jones - 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse Child
Philadelphia, PA 19107-3496 Care Centers of America, Inc.
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*Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser or sub-adviser of the Fund or the Distributor, and Mr. Sablowsky, who is considered to be an affiliated person. $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of the Fund and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Pension or
Retirement Estimated
Aggregate Benefits Annual
Compensation Accrued as Benefits
Name of Person/ from Part of Fund Upon
Position Registrant Expenses Retirement
-------- ---------- -------- ----------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee) pursuant to which the Fund 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 BlackRock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the Municipal Money Market Portfolio's administrator and the Fund's transfer and dividend disbursing agent, and Provident Distributors Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market and Municipal Money Market Portfolios. The advisory agreements relating to the Money Market Portfolio is dated August 16, 1988, and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market Portfolio, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
*2 moved from here; text not shown
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Money Market
Portfolio
Municipal Money
Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) **1 Waivers Reimbursements
---------- --------------- ----------- --------------
Money Market
Portfolio $5,366,431 $3,603,130 $469,986
Municipal Money
Market Portfolio $ 201,095 $1,269,553 $ 14,921
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**2 For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money 190,687 1,218,973 $ 17,576
Market Portfolio
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Each Portfolio bears all of its own expenses not specifically assumed by
BIMC. General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by the
Fund to its directors and officers; (g) organizational costs; (h) fees paid to
the investment adviser and PFPC; (i) fees and expenses of officers and directors
who are not affiliated with the Portfolios' investment adviser or Distributor;
(j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees;
(o) brokerage fees and commissions; (p) certain of the fees and expenses of
registering and qualifying the Portfolios and their shares for distribution
under federal and state securities laws; (q) expenses of preparing prospectuses
and statements of additional information and distributing annually to existing
shareholders that are not attributable to a particular class of shares of the
Fund; (r) the expense of reports to shareholders, shareholders' meetings and
proxy solicitations that are not attributable to a particular class of shares of
the Fund; (s) fidelity bond and directors' and officers' liability insurance
premiums; (t) the expense of using independent pricing services; and (u) other
expenses which are not expressly assumed by the Portfolio's investment adviser
under its advisory agreement with the Portfolio. The Cash Preservation Classes
of the Fund pay their own distribution fees, and may pay a different share than
other classes of other expenses (excluding advisory and custodial fees) if those
expenses are actually incurred in a different amount by the Cash Preservation
Classes or if they receive different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were approved with respect to the Money Market Portfolio by the shareholders of the Portfolio at a special meeting held December 22, 1989. The Investment Advisory Agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned. The Sub-Advisory Agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held December 22, 1989. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreement. PPFC serves as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (the "Administration Agreement"). PPFC has agreed to furnish to the Fund on behalf of the Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or the Portfolio in connection with the performance of services under the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreement, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market Portfolio.
BIMC is obligated to render administrative services to the Money Market Portfolio pursuant to the investment advisory agreement. Pursuant to the terms of a Delegation Agreement, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to the Money Market Portfolio. The Fund pays administration fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid (After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Municipal Money $0 $0
Market Portfolio
Money Market
Portfolio
|
For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid (After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Municipal Money $448,548 $0 $0
Market Portfolio
|
For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid (After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Municipal Money $428,209 $0
Market Portfolio
|
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the
Fund's assets pursuant to a custodian agreement dated August 16, 1988, as
amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a)
maintains a separate account or accounts in the name of each Portfolio, (b)
holds and transfers portfolio securities on account of each Portfolio, (c)
accepts receipts and makes disbursements of money on behalf of each Portfolio,
(d) collects and receives all income and other payments and distributions on
account of each Portfolio's portfolio securities, and (e) makes periodic reports
to the Fund's Board of Directors concerning each Portfolio's operations. PNC
Bank is authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible
for the performance of all its duties under the Custodian Agreement and holds
the Fund harmless from the acts and omissions of any sub-custodian. For its
services to the Fund under the Custodian Agreement, PNC Bank receives a fee
which is calculated based upon each Portfolio's average daily gross assets as
follows: $.25 per $1,000 on the first $50 million of average daily gross assets;
$.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Shares pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems Shares, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Portfolio. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio, for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, entered into by the Distributor and the Fund on behalf of each of the Cash Preservation Classes (the "Distribution Agreement") and separate Plans of Distribution, as amended, for each of the Cash Preservation Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Cash Preservation Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreements, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plans and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plans will continue in effect only so long as they are approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Cash Preservation Class under the Plans shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Cash Preservation Class; and (4) while the Plans remain in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the Cash Preservation Classes of the Money Market Portfolio and the Municipal Money Market Portfolio in the aggregate amounts of $_____ and $_____, respectively. Of those amounts $_____ and $____, respectively, was paid to dealers with whom PDI had entered into dealer agreements, and $_____ and $_____, respectively, was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the Plans for the Cash Preservation Classes of the Money Market Portfolio and the Municipal Money Market Portfolio in the aggregate amounts of $_____ and $______, respectively. Of these amounts, $_____ and $_____, respectively, was paid to dealers with whom Counsellors had entered into dealer agreements, and $______ and $______, respectively, was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that both Portfolios may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because both Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. Neither of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is
believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios, held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of each class in the Portfolio'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. The net asset value of each class of the Fund is determined independently of the other classes. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. Each Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each weekday when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of both of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Both of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to
those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Both of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
The annualized yield for the seven-day period ended August 31, 1998 for the Cash Preservation Classes of each of the Money Market Portfolio and the Municipal Money Market Portfolio before waivers was as follows:
Tax-Equivalent
Yield
(assumes a
Effective federal income
Portfolio Yield Yield tax rate of 28%)
--------- ----- ----- ----------------
Money Market
Municipal Money Market
|
The annualized yield for the seven-day period ended August 31, 1998 for the Cash Preservation Classes of each of the Money Market Portfolio and the Municipal Money Market Portfolio after waivers was as follows:
Tax-Equivalent
Yield
(assumes
Effective a federal income
Portfolio Yield Yield tax rate of 28%)
--------- ----- ----- ----------------
Money Market
Municipal Money Market
|
Total return and yield may fluctuate daily and does not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund
Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio's generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of the Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class L Common Stock and Class M Common Stock and constitute the Cash Preservation Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Portfolios; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a
meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of ________________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the
Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants,[ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
JANNEY MONTGOMERY SCOTT MONEY FUNDS
Money Market Portfolio,
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of four classes (the "Janney Shares") representing interests in four investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Janney Montgomery Scott Money Funds Prospectus of the Fund dated ____________, 1998, (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ____________, 1998.
CONTENTS
Prospectus
Page Page
---- ----------
General..........................................................................
Investment Objectives and Policies...............................................
Directors and Officers...........................................................
Investment Advisory, Distribution and Servicing Arrangements.....................
Portfolio Transactions...........................................................
Purchase and Redemption Information..............................................
Valuation of Shares..............................................................
Performance Information..........................................................
Taxes ........................................................................
Miscellaneous....................................................................
Financial Statements.............................................................
Appendix A.......................................................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to four classes of shares (the "Janney Classes") representing interests in four investment portfolios (the "Portfolios") of the Fund: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Janney Classes are offered by the Prospectus dated ___________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market Portfolio or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market, Municipal Money Market or New York Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market, Municipal Money Market and New York Municipal Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market, Municipal Money Market or New York Municipal Money Market Portfolios has such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that a Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because a Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, it is expected that commitments to purchase "when issued" securities will not exceed 25% of the value of a Portfolio's total assets absent unusual market conditions. When any of the Money Market Portfolio, Municipal Money Market Portfolio or the New York Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio, Municipal Money Market Portfolio or New York Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. These Portfolios' reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 Portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark-to-market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the
United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market and Government Obligations Money Market Portfolios may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMO interests. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs, payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities, (2) securities that
(a) are rated (at the time of purchase) by two or more nationally recognized
statistical rating organizations ("Rating Organizations") in the two highest
rating categories for such securities (e.g., commercial paper rated "A-1" or
"A-2," by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at
the time of purchase) by the only Rating Organization rating the security in one
of its two highest rating categories for such securities; (3) short-term
obligations and subject to certain SEC requirements, long-term obligations that
have remaining maturities of 13 months or less, provided in each instance that
such obligations have no short-term rating and are comparable in priority and
security to a class of short-term obligations of the issuer that has been rated
in accordance with (2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have
comparable obligations rated by a Rating Organization ("Unrated Securities"),
provided that such securities are determined to be of comparable quality to a
security satisfying (2) or (3) above; and (5) subject to certain conditions
imposed under SEC rules, obligations guaranteed by persons which meet the
requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Special Considerations Relating To New York Municipal Obligations. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional Information. The accuracy and completeness of the information contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies.
The forecast of the State's economy shows continued expansion during the 1998 calendar year, with employment growth gradually slowing as the year progresses. The financial and business service sectors are expected to continue to do well, while employment in the manufacturing and government sectors will post only small, if any, declines. On an average annual basis, the employment growth rate in the State is expected to be higher than in 1997 and the unemployment rate is expected to drop further to 6.1 percent. Personal income is expected to record moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the previous year as the recent robust growth in bonus payments moderates.
There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998-99 budget process. Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than-projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund spending offsets, and other actions necessary to bring projected disbursements and receipts into balance.
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Other actions taken in the 1997-98 adopted budget add further pressure to future budget balance in the State. For example, the fiscal effects of tax reductions adopted in the 1997-98 budget are projected to grow more substantially beyond the 1998-99 fiscal year, with incremental costs averaging in excess of $1.3 billion annually over the last three years of the tax reduction program. These incremental costs reflect the phase-in of State-funded school property tax and local income tax relief, the phase-out of the assessments on medical providers, and reductions in estate and gift levies, utility gross receipts taxes, and the State sales tax on clothing. The full annual cost of the enacted tax reduction package is estimated at approximately $4.8 billion when fully effective in State fiscal year 2001-02. In addition, the 1997-98 budget included multi-year commitments for school aid and pre-kindergarten early learning programs which could add as much as $1.4 billion in costs when fully annualized in fiscal year 2001-02. These spending commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the 2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998-99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the School Tax Relief Program ("STAR"), expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million available for future needs, a balance of $400 million in the Tax Stabilization Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF is used to finance various legislative and executive initiatives. The CRF provides resource to help finance any extraordinary litigation costs during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1999 to 1998. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $62 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent.
**1 The economic and financial condition of the State may be affected by various financial, social, economic and political factors. Those factors can be very complex, may vary from fiscal year to fiscal year, and are frequently the result of actions taken not only by the State and its agencies and instrumentalities, but also by entities, such as the federal government, that are not under the control of the State. In addition, the financial plan is based upon forecasts of national and State economic activity. Economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. Actual results, however, could differ materially and adversely from the projections set forth in a financial plan, and those projections may be changed materially and adversely from time to time.
**2 In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the Division of Budget believes it could take similar actions should variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes.
The State ended its 1997-98 fiscal year in balance on a cash basis, with a General Fund cash surplus as reported by DOB of approximately $2.04 billion. The cash surplus was derived primarily from higher-than-anticipated receipts and lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205 million from the prior fiscal year. The balance is held in three accounts within the General Fund: the Tax Stabilization Reserve Fund, the Contingency Reserve Fund and the Community Projects Fund. The TSRF closing balance was $400 million, following a required deposit of $15 million (repaying a transfer made in 1991-92) and an extraordinary deposit of $68 million made from the 1997-98 surplus. The CRF closing balance was $68 million, following a $27 million deposit from the surplus. The CPF, which finances legislative initiatives, closed the fiscal year with a balance of $170 million, an increase of $95 million. The General Fund closing balance did not include $2.39 billion in the tax refund reserve account, of which $521 million was made available as a result of the Local Government Assistance Corporation ("LGAC") financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year (including net tax refund reserve account activity) totaled $34.55 billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97. General Fund disbursements and transfers to other funds were $34.35 billion, an annual increase of $1.45 billion or 4.41 percent.
Debt Limits and Outstanding Debt. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general obligation borrowing (i.e., borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State.
The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms, lease-purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual-obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. The State does not anticipate that it will be called upon to make any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("S&P") reduced its ratings on the State's general obligation bonds from A to A- and, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, S&P revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget, will be released on or before July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year.
The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated that approximately $191 million will be issued to finance agency equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems.
Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was released with the 1998-99 Executive Budget on January 20, 1998. As a part of that Plan, changes were proposed to the State's 1997-98 borrowing plan, including: the delay in the issuance of COPs to finance welfare information systems until 1998-99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to maintain proper housing; (4) alleged responsibility of New York State officials to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates; (6) challenges to the constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non-Indian consumers on Indian reservations; (8) a challenge to the constitutionality of Clean Water/Clean Air Bond Act; and (9) a challenge to the Governor's application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1997-98 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short-term notes to the public again until 1979. In 1975, S&P suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications.
Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. As of June 30, 1997, MAC had outstanding an aggregate of approximately $4.267 billion of its bonds. MAC is authorized to issue bonds and notes to refund its outstanding bonds and notes and to fund certain reserves, without limitation as to principal amount, and to finance certain capital commitments to the Transit Authority and the New York City School Construction Authority through the 1997 fiscal year in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The 1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-987 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the General Fund, primarily as a result of the use of the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million.
Although the City has maintained balanced budgets in each of its last seventeen fiscal years and is projected to achieve balanced operating results for the 1998 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's indebtedness within the forecast level of the constitutional restrictions on the amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's
current financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to undertake only approximately $1.4 billion of seasonal financing. The City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years.
Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary deficits that resulted in the establishment of a Supervisory Board for the City of Troy in 1994. The Supervisory Board's powers were increased in 1995, when Troy MAC was created to help Troy avoid default on certain obligations. The legislation creating Troy MAC prohibits the city of Troy from seeking federal bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities are scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional $21 million will be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. Twenty-one localities had outstanding indebtedness for deficit financing at the close of their fiscal year ending in 1996.
From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future.
Year 2000 Compliance. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result.
Investment Limitations
Money Market Portfolio and Municipal Money Market Portfolio. Neither the Money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the
securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government securities,
to 5% of its total assets, except that the Money Market Portfolio may invest
more than 5% of its total assets in First Tier Securities of one issuer for a
period of up to three business days. "First Tier Securities" include eligible
securities that (i) if rated by more than one Rating Organization (as defined in
the Prospectus), are rated (at the time of purchase) by two or more Rating
Organizations in the highest rating category for such securities, (ii) if rated
by only one Rating Organization, are rated by such Rating Organization in its
highest rating category for such securities, (iii) have no short-term rating and
are comparable in priority and security to a class of short-term obligations of
the issuer of such securities that have been rated in accordance with (i) or
(ii) above, or (iv) are Unrated Securities that are determined to be of
comparable quality to such securities. Purchases of First Tier Securities that
come within categories (ii) and (iv) above will be approved or ratified by the
Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
2. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
3. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
4. Act as an underwriter.
5. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the
amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) Purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(5) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts;
(7) invest in oil, gas or mineral exploration or development programs;
(8) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(10) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the New York Municipal Money Market Portfolio may not (i) under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax and does not constitute an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income tax) are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, the Portfolio will not purchase the securities of any issuer if as a result more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer, except that (a) up to 50% of the value of the Portfolio's assets may be invested without regard to this 5% limitation, provided that no more than 25% of the value of the Portfolio's assets are invested in the securities of any
one issuer and (b) this 5% limitation does not apply to securities issued or guaranteed by the U.S. Government, or its agencies or instrumentalities. For purposes of this limitation, a security is considered to be issued by the governmental entity (or entities) whose assets and revenues back the security, or, with respect to a private activity bond that is backed only by the assets and revenues of a non-governmental user, by such non-governmental user. In certain circumstances, the guarantor of a guaranteed security may also be considered to be an issuer in connection with such guarantee. This investment policy is not fundamental and may be changed by the Board of Directors without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Arnold M. Reichman -50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director
and Executive Officer of
Counsellors Securities
Inc.; Director/Trustee
of various investment companies
advised by Warburg Pincus
Asset Management, Inc.
Robert Sablowsky -59* Director Senior Vice President, Fahnestock Co.,
110 Wall Street Inc. (a registered broker-dealer); Prior
New York, NY 10005 to October 1996, Executive Vice
President of Gruntal & Co., Inc. (a
registered broker-dealer).
Francis J. McKay -61 Director Since 1963, Executive Vice President,
7701 Burholme Avenue Fox Chase Cancer Center (biomedical
Philadelphia, PA 19111 research and medical care).
|
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Marvin E. Sternberg -63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies and
precision coated abrasives); since 1968,
Director and President, Mart MMM, Inc.
(formerly Montgomeryville Merchandise
Mart Inc.) and Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart, Inc.)
(shopping centers); and since 1975,
Director and Executive Vice President,
Cellucap Mfg. Co., Inc. (manufacturer of
disposable headwear).
Julian A. Brodsky -64 Director Director and Vice Chairman since 1969,
1234 Market Street Comcast Corporation (cable television
16th Floor and communications); Director, Comcast
Philadelphia, PA 19107-3723 Cablevision of Philadelphia (cable
television and communications) and
Nextel (wireless communications).
Donald van Roden -73 Director Self-employed businessman. From
1200 Old Mill Lane and Chairman of February 1980 to March 1987, Vice
Wyomissing, PA 19610 the Board Chairman, SmithKline Beecham Corporation
(pharmaceuticals); Director, AAA
Mid-Atlantic (auto service); Director,
Keystone Insurance Co.
Edward J. Roach -74 President Certified Public Accountant; Vice
Suite 100 and Chairman of the Board, Fox Chase Cancer
Bellevue Park Treasurer Center; Trustee Emeritus, Pennsylvania
Corporate Center School for the Deaf; Trustee Emeritus,
400 Bellevue Parkway Immaculata College; President or Vice
Wilmington, DE 19809 President and Treasurer of various
investment companies advised by
BlackRock Institutional Management
Corporation; Director, The Bradford
Funds, Inc.
|
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Morgan R. Jones -59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse Child
Philadelphia, PA 19107-3496 Care Centers of America, Inc.
|
* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Pension or
Retirement
Benefits
Aggregate Accrued as Estimated Annual
Name of Person/ Compensation Part of Fund Benefits Upon
Position from Registrant Expenses Retirement
--------------- --------------- ------------ ----------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
|
On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's Custodian, PFPC Inc. ("PFPC"), the administrator to the Municipal Money Market and New York Municipal Money Market Portfolios and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc., (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios (except the New York Municipal Money Market Portfolio) with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market, Municipal Money Market and Government Obligations Portfolios. The advisory agreements relating to the Money Market and Government Obligations Money Market Portfolios are each dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is dated November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market and Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Money Market Portfolio
Municipal Money Market Portfolio
Government Obligations Money Market
Portfolio
New York Municipal Money Market
Portfolio
|
For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
Municipal Money Market Portfolio $ 201,095 $1,269,553 $ 14,921
Government Obligations Money Market
Portfolio $1,774,123 $ 647,063 $404,193
New York Municipal Money Market
Portfolio $ 21,831 $ 324,917 $ 0
|
For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money Market Portfolio $ 190,687 $1,218,973 $ 7,576
Government Obligations Money Market
Portfolio $1,638,622 $ 671,811 $406,954
New York Municipal Money Market
Portfolio $ 2,709 $ 268,017 $ 0
|
Each Portfolio bears all of its own expenses not specifically assumed by
BIMC. General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by the
Fund to its directors and officers; (g) organizational costs; (h) fees paid to
the investment adviser and PFPC; (i) fees and expenses of officers and directors
who are not affiliated with the Portfolios' investment adviser or Distributor;
(j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees;
(o) brokerage fees and commissions; (p) certain of the fees and expenses of
registering and qualifying the Portfolios and their shares for distribution
under federal and state securities laws; (q) expenses of preparing prospectuses
and statements of additional information and distributing annually to existing
shareholders that are not attributable to a particular class of shares of the
Fund; (r) the expense of reports to shareholders, shareholders' meetings and
proxy solicitations that are not attributable to a particular class of shares of
the Fund; (s) fidelity bond and directors' and officers' liability insurance
premiums; (t) the expense of using independent pricing services and (u) other
expenses which are not expressly assumed by the Portfolio's investment adviser
under its advisory agreement with the Portfolio. The Janney Montgomery Scott
Classes of the Fund pay their own distribution fees, and may pay a different
share than other classes of other expenses (excluding advisory and custodial
fees) if those expenses are actually incurred in a different amount by the
Janney Montgomery Scott Classes or if they receive different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Money Market and Government Obligations Money Market Portfolios by the shareholders of each Portfolio at a special meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned and the sub-advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. The Advisory Agreement was approved with respect to the New York Municipal Money Market Portfolio by the Portfolio's shareholders at a special meeting of shareholders held November 21, 1991, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the New York Municipal Money Market Portfolio pursuant to an Administration Agreement dated November 5, 1991 and as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (together, the "Administration Agreements"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market and New York Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreements, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market and New York Municipal Money Market Portfolios.
BIMC is obligated to render administrative services to the Money Market and Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of Delegation Agreements, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio
New York Municipal Money
Market Portfolio
Money Market Portfolio
Government Obligations Money
Market Portfolio
|
For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $448,548 $0 $0
New York Municipal Money Market Portfolio $ 99,071 $0 $0
|
For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $428,209 $0 $0
New York Municipal Money Market Portfolio $ 67,204 $10,146 $0
|
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Janney Classes pursuant to a Transfer Agency Agreement dated November 5, 1991 and supplements dated November 5, 1991 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of each of the Janney Classes, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Janney Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, entered into by the Distributor and the Fund on behalf of each of the Janney Classes, (the "Distribution Agreement") and separate
Plans of Distribution, as amended, for each of the Janney Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Janney Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreements, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plans and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plans will continue in effect only so long as they are approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Janney Class under the Plans shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Janney Class; and (4) while the Plans remain in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the Janney Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio in the aggregate amounts of $_____, $_____, $_____, and $_____, respectively. Of those amounts, $_____, $_____, $_____, and $____, respectively, was paid to dealers with whom PDI had entered into dealer agreements, and $_____,. $_____, $______, and $_____, respectively, was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the plans for the Janney Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio in the aggregate amounts of $_____, $_____, $_____, and $______, respectively. Of these amounts, $_____, $______, $______, and $_____, was paid to dealers with whom Counsellors had entered into dealer agreements, and $______, $______, $______, and $______, respectively, was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively each a broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some
cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedure, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of a class in the Portfolio's cash, securities, 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. The net asset value of each class of the Fund is determined independently of the other classes of the Fund. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. Each Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each weekday when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There
is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
The annualized yield for the seven (7) day period ended August 31, 1998 for the Janney Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio before waivers was as follows:
Tax-Equivalent Yield
(assumes a federal
Effective income
Portfolio Yield Yield tax rate of 28%)
--------- ----- --------- --------------------
Money Market N/A
Municipal Money Market
Government Obligations Money
Market N/A
New York Municipal Money
Market
|
The annualized yield for the seven-day period ended August 31, 1998 for the Janney Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio after waivers was as follows:
Tax-Equivalent Yield
(assumes a federal
Effective income
Portfolio Yield Yield tax rate of 28%)
--------- ----- --------- --------------------
Money Market N/A
Municipal Money Market
Government Obligations Money
Market N/A
New York Municipal Money
Market
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Total return and yield may fluctuate daily and does not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio's generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of such Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock
(BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class Janney Money, Class Janney Municipal Money, Class Janney Government Money and Class Janney N.Y. Municipal Money Common Stock represent the Janney Classes.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of ______________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
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Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
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Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
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BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
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BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
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BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
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Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
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SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
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Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
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N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
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Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
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BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
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As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of
Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
RBB Select Money Market Portfolio
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of a class (the "Select Shares" or the "Shares") representing interests in the Money Market Portfolio (the "Money Market Portfolio" or the "Portfolio") of The RBB Fund, Inc. (the "Fund"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Prospectus of the Fund, dated __________, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated __________, 1998.
CONTENTS
Prospectus
Page Page
---- ---------
General..........................................................................
Investment Objective and Policies................................................
Directors and Officers...........................................................
Investment Advisory, Distribution and Servicing Arrangements.....................
Portfolio Transactions ........................................................
Purchase and Redemption Information..............................................
Valuation of Shares..............................................................
Performance of Information.......................................................
Taxes ........................................................................
Additional Information Concerning Fund Shares ..................................
Miscellaneous....................................................................
Financial Statements.............................................................
Appendix A....................................................................A-1
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to a class of shares (the "Select Class" or the "Class") representing interests in the Money Market Portfolio (the "Money Market Portfolio" or the "Portfolio") of the Fund. The Class is offered by the Prospectus dated __________, 1998. The Fund was organized as a Maryland corporation on February 29, 1998.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolio. A description of ratings of Municipal Obligations (defined below) and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by the Portfolio pursuant to the Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the 1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by
the Money Market Portfolio may have maturities of more than 13 months, provided:
(i) the Portfolio is entitled to the payment of principal at any time, or during
specified intervals not exceeding 13 months, upon giving the prescribed notice
(which may not exceed 30 days), and (ii) the rate of interest on such
instruments is adjusted at periodic intervals which may extend up to 13 months.
In determining the average weighted maturity of the Money Market Portfolio and
whether a variable rate demand instrument has a remaining maturity of 13 months
or less, each long-term instrument will be deemed by the Portfolio to have a
maturity equal to the longer of the period remaining until its next interest
rate adjustment or the period remaining until the principal amount can be
recovered through demand. The absence of an active secondary market with respect
to particular variable and floating rate instruments could make it difficult for
a Portfolio to dispose of variable or floating rate notes if the issuer
defaulted on its payment obligations or during periods that the Portfolio is not
entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Portfolio may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market Portfolio has such commitments outstanding, it will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that the Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because the Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, it is expected that commitments to purchase "when- issued" securities will not exceed 25% of the value of the Portfolio's total assets absent unusual market conditions. When the Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. The Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
The Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by either such Portfolio will not exceed 1/2 of 1% of the value of such Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
The Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. The Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section 4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements
described in the Prospectus generally equals the price paid by the Portfolio
plus interest negotiated on the basis of current short-term rates (which may be
more or less than the rate on the securities underlying the repurchase
agreement). The financial institutions with which the Portfolio 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 Portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's
adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or
(ii) the daily amortization of the difference between the purchase price and the
repurchase price specified in the repurchase agreement. The Portfolio's adviser
or sub-adviser will mark-to-market daily the value of the securities. Securities
subject to repurchase agreements will be held by the Fund's custodian in the
Federal Reserve/Treasury book-entry system or by another authorized securities
depository. Repurchase agreements are considered to be loans by the Portfolio
under the 1940 Act.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by the Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only
from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds that are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential
or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMO interests. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs, payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include (1) U.S. Government securities, (2) securities that (a) are rated (or, in certain cases, whose guarantor is rated) at the time of purchase
by two or more Rating Organizations (as defined in the Prospectus) in the two highest rating categories for such securities (e.g., commercial paper rated "A-1" or "A-2" by S&P, or "Prime-1" or "Prime-2" by Moody's) or (b) are rated (or, in certain cases, whose guarantor, is rated) (at the time of purchase) by the only Rating Organization rating the security in one of its two highest rating categories for such securities; (3) securities that have no short term rating (or securities with a guarantee with no such rating), but which are (or whose guarantee is) comparable in priority and security to a class of short-term obligations of the issuer or provider that has been rated in accordance with 2(a) or (b) above ("comparable obligations"); and (4) securities that are not (or whose guarantor is not) rated and are issued or guaranteed by a person that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are (or their guarantee is) determined to be of comparable quality to a security satisfying (2) or (3) above.
Illiquid Securities. The Portfolio may not invest more than 10% of its net assets in illiquid securities (including repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. The Money Market Portfolio's repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolio may purchase securities which are not registered under the Securities Act but which may 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 Portfolio's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Portfolio's investment adviser will monitor the liquidity of restricted securities in the Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Investment Limitations
The Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with such borrowing, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of the borrowing and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration, the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Select Class Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities (other than securities with certain guarantees) of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" generally include eligible securities that (i) if rated (or guaranteed by a person which has been rated) by more than one Rating Organization (as defined in the Prospectus), are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated (or guaranteed by a person which has been rated) by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above (or have a guarantee which satisfies this standard), or (iv) are Unrated Securities that are determined to be of comparable quality to such securities (or have a guarantee which satisfies this standard). The Money Market Portfolio's compliance with this diversification requirement is deemed to be in compliance with the fundamental diversification limit in paragraph 2 above.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
*Arnold M. Reichman -50 Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and
Executive Officer of Counsellors
Securities Inc.; Director/Trustee of
various investment companies advised
by Warburg Pincus Asset Management,
Inc.
*Robert Sablowsky -59 Director Senior Vice President, Fahnestock Co.,
110 Wall Street Inc. (a registered broker-dealer); Prior
New York, NY 10005 to October 1996, Executive Vice
President of Gruntal & Co., Inc. (a
registered broker-dealer).
Francis J. McKay -61 Director Since 1963, Executive Vice President,
7701 Burholme Avenue Fox Chase Cancer Center (biomedical
Philadelphia, PA 19111 research and medical care).
Marvin E. Sternberg -63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies and
precision coated abrasives); since 1968,
Director and President, Mart MMM, Inc.
(formerly Montgomeryville Merchandise
Mart Inc.) and Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart, Inc.)
(shopping centers); and since 1975,
Director and Executive Vice President,
Cellucap Mfg. Co., Inc. (manufacturer of
disposable headwear).
Julian A. Brodsky -64 Director Director and Vice Chairman since 1969,
1234 Market Street Comcast Corporation (cable television
16th Floor and communications); Director, Comcast
Philadelphia, PA 19107-3723 Cablevision of Philadelphia (cable
television and communications) and
Nextel (wireless communications).
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Donald van Roden -73 Director Self-employed businessman. From
1200 Old Mill Lane and Chairman of February 1980 to March 1987, Vice
Wyomissing, PA 19610 the Board Chairman, SmithKline Beecham Corporation
(pharmaceuticals); Director, AAA
Mid-Atlantic (auto service); Director,
Keystone Insurance Co.
Edward J. Roach -74 President Certified Public Accountant; Vice
Suite 100 and Chairman of the Board, Fox Chase Cancer
Bellevue Park Treasurer Center; Trustee Emeritus, Pennsylvania
Corporate Center School for the Deaf; Trustee Emeritus,
400 Bellevue Parkway Immaculata College; President or Vice
Wilmington, DE 19809 President and Treasurer of various
investment companies advised by
BlackRock Institutional Management
Corporation; Director, The Bradford
Funds, Inc.
Morgan R. Jones -59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse Child
Philadelphia, PA 19107-3496 Care Centers of America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
Pension or
Aggregate Retirement Benefits Estimated Annual
Compensation from Accured as Part Benefits Upon
Name of Person/ Position Regostrant of Fund Expenses Retirement
------------------------- ----------------- ------------------- ---------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 BlackRock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolio's adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund 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 Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, ADMINISTRATION, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolio has an investment advisory agreements with BIMC. Although BIMC in turn has a sub-advisory agreement respecting the Portfolio with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreement, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Portfolio. The advisory agreement relating to the Portfolio is dated August 16, 1988. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the period ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Money Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
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For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows
Fees Paid
(After
waivers and
Portfolio reimbursements Waivers Reimbursements
--------- -------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
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The Portfolio bears all of its own expenses not specifically assumed by BIMC.
General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by the
Fund to its directors and officers; (g) organizational costs; (h) fees paid to
the investment adviser and PFPC; (i) fees and expenses of officers and directors
who are not affiliated with the Portfolios' investment adviser or Distributor;
(j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees;
(o) brokerage fees and commissions; (p) certain of the fees and expenses of
registering and qualifying the Portfolios and their shares for distribution
under federal and state securities laws; (q) expenses of preparing prospectuses
and statements of additional information and distributing annually to existing
shareholders that are not attributable to a particular class of shares of the Fund; (r) the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of the Fund; (s) fidelity bond and directors' and officers' liability insurance premiums; (t) the expense of using independent pricing services; and (u) other expenses which are not expressly assumed by the Portfolio's investment adviser under its advisory agreement with the Portfolio. The Select Class of the Fund pays its own distribution 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 Select Class or if it receives different services.
Under the Advisory Agreement, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Portfolio in connection with the performance of the Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of its respective duties or from reckless disregard of its duties and obligations thereunder.
The Advisory Agreements were most recently approved on July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were approved by the shareholders of the Money Market Portfolio at a special meeting held December 22, 1989, as adjourned. The Advisory Agreements are terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. The Advisory Agreements may also be terminated by BIMC or PNC Bank on 60 days' written notice to the Fund. Each of the Advisory Agreements terminate automatically in the event of assignment thereof.
Administrative Services. BIMC is obligated to render administrative services to the Money Market Portfolio pursuant to the investment advisory agreement. Pursuant to the terms of a Delegation Agreement, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to this Portfolio. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- ------------------ ------- --------------
Money Market Portfolio
|
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 (the "Distribution Agreement"), the Distributor will use appropriate efforts to distribute shares of the Fund. As compensation for
its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee of 0.01%, to be calculated daily and paid monthly. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI for the RBB Select Money Market Portfolio in the aggregate amount of $_____. Of that amount, $_____ was paid to dealers with whom PDI had entered into dealer agreements, and $_____ was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, ("Counsellors") for the RBB Select Money Market Portfolio in the aggregate amount of $______. Of that amount, $_____ was paid to dealers with whom Counsellors had entered into dealer agreements, and $______ was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment sales, marketing and administrative expenses. The Fund believes that the Portfolio's 12b-1 Plan may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the 12b-1 Plan by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the Portfolio, (b) holds and transfers portfolio securities on account of the Portfolio, (c) accepts receipts and makes disbursements of money on behalf of the Portfolio, (d) collects and receives all income and other payments and distributions on account of the Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning the Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon the Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Select Shares pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of the Select Class, (b) addresses and mails all communications by the Select Class to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of the Select Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in the Portfolio for orders placed via third parties and relayed electronically to PFPC, and $17.00 per account in the Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PORTFOLIO TRANSACTIONS
The Portfolio intends to purchase only securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that the Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because the Portfolio intends to purchase only securities with remaining maturities of 13 months or less, its portfolio turnover rate will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by the Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolio does not intend to seek profits through short term trading.
Purchases of portfolio securities by the Portfolio are made from dealers, underwriters and issuers; sales are made to dealers and issuers. The Portfolio does not currently expect to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of the Portfolio to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of the Portfolio, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC 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 Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that the Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for the Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. The Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is the member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing the Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of the Portfolio.
Under the 1940 Act, the Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
A shareholder of record may be required by the Fund's Board of Directors to redeem shares in the Class if the balance in such shareholder's account drops below $500 and the shareholder does not increase its balance to at least $500 upon 30 days' written notice. If a Customer has agreed with a particular PNC Bank to maintain a minimum balance in his account, and the balance in the PNC Bank account falls below that minimum, the Customer may be obliged to redeem all or part of his shares in the Portfolio to the extent necessary to maintain the minimum balance required.
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolio at $1.00 per share. Net asset value per share, the value of an individual share in the Portfolio, is computed by adding the value of the proportionate interest of the class in a Portfolio's cash, securities, and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is determined independently of each other class. The Portfolio's "net assets" equal the value of the Portfolio's investments and other securities less its liabilities. The Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each weekday when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Veterans' Day and Columbus Day.
The Fund calculates the value of the portfolio securities of the Portfolio by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, the Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price the Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for the Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for the Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
The Portfolio will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity greater than 13 months under Rule 2a-7 of the 1940 Act, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
The Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for the Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
Performance may fluctuate daily and does not provide a basis for determining future performance. Because the performance of the Portfolio will fluctuate, it cannot be compared with performance on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, performance information may be useful to an investor considering temporary investments in money market instruments. In comparing the performance of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of a portfolio securities, the method used by each fund to compute the performance (methods may differ) and whether there are any special account charges which may reduce the effective performance.
The yields and returns on certain obligations, including the money market instruments in which the Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by the Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether the Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the yield and returns of the Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of the Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and to distribute its income to
shareholders each year, so that the Portfolio generally will be relieved of
federal income and excise taxes. If the Portfolio were to fail to so qualify:
(1) the Portfolio would be taxed at regular corporate rates without any
deduction for distributions to shareholders; and (2) shareholders would be taxed
as if they received ordinary dividends, although corporate shareholders could be
eligible for the dividends received deduction.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV
Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class Select Common Stock, constitute the Select Class, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of __________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning the Fund's Shares" above. The Fund does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. Examples include: obligations linked or indexed to equities, currencies, or commodities; obligations exposed to severe prepayment risk--such as interest-only or principal-only mortgage securities and obligations with unusually risky interest terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
Robertson Stephens Money Market Portfolio
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of a class (the "Sansom Street Shares" or the "Shares") representing interests in the Money Market Portfolio (the "Money Market Portfolio" or the "Portfolio") of The RBB Fund, Inc. (the "Fund"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Prospectus of the Fund, dated _________, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated _______, 1998.
CONTENTS
Prospectus
Page Page
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General..............................................
Investment Objectives and
Policies...........................................
Directors and Officers...............................
Investment Advisory, Distribution and
Servicing Arrangements.............................
Portfolio Transactions...............................
Purchase and Redemption
Information........................................
Valuation of Shares..................................
Performance Information..............................
Taxes................................................
Additional Information Concerning
Fund Shares........................................
Miscellaneous........................................
Financial Statements.................................
Appendix A...........................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertaining to a class of shares (the "Sansom Street Class" or the "Class") representing interests in the Money Market Portfolio (the "Money Market Portfolio" or the "Portfolio") of the Fund. The Class is offered by the Prospectus dated __________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended ("the 1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by
the Money Market Portfolio may have maturities of more than 13 months, provided:
(i) the Portfolio is entitled to the payment of principal at any time, or during
specified intervals not exceeding 13 months, upon giving the prescribed notice
(which may not exceed 30 days), and (ii) the rate of interest on such
instruments is adjusted at periodic intervals which may extend up to 13 months.
In determining the average weighted maturity of the Money Market Portfolio and
whether a variable rate demand instrument has a remaining maturity of 13 months
or less, each long-term instrument will be deemed by the Portfolio to have a
maturity equal to the longer of the period remaining until its next interest
rate adjustment or the period remaining until the principal amount can be
recovered through demand. The absence of an active secondary market with respect
to particular variable and floating rate instruments could make it difficult for
a Portfolio to dispose of variable or floating rate notes if the issuer
defaulted on its payment obligations or during periods that the Portfolio is not
entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Portfolio may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market Portfolio has such commitments outstanding, it will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that the Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because the Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, it expected that commitments to purchase "when- issued" securities will not exceed 25% of the value of the Portfolio's total assets absent unusual market conditions. When the Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. The Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
The Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by either such Portfolio will not exceed 1/2 of 1% of the value of such Portfolios total assets calculated immediately after each stand-by commitment is acquired.
The Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. The Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section 4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements
described in the Prospectus generally equals the price paid by the Portfolio
plus interest negotiated on the basis of current short-term rates (which may be
more or less than the rate on the securities underlying the repurchase
agreement). The financial institutions with which the Portfolio 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 Portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's
adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or
(ii) the daily amortization of the difference between the purchase price and the
repurchase price specified in the repurchase agreement. The Portfolio's adviser
or sub-adviser will mark-to-market daily the value of the securities. Securities
subject to repurchase agreements will be held by the Fund's custodian in the
Federal Reserve/Treasury book-entry system or by another authorized securities
depository. Repurchase agreements are considered to be loans by the Portfolio
under the 1940 Act.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those which were industrial development bonds under prior law.
Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds that are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMO interests. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs, payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include (1) U.S. Government securities, (2) securities that (a) are rated (at the time of purchase) by two or more Rating Organizations (as defined in the Prospectus) in the two highest rating categories for such securities (e.g., commercial paper rated "A-1" or "A-2" by S&P, or "Prime-1" or "Prime-2" by Moody's) or (b) are rated (at the time of purchase) by the only Rating Organization rating the security in one of its two highest rating categories for such securities; (3) short-term obligations and subject to certain SEC requirements; long-term obligations that have remaining maturities of 13 months or less, provided in each instance that such obligations have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer that has been rated in accordance with 2(a) or (b) above ("comparable obligations"); (4) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to a security satisfying (2) or (3) above; and (5) subject to certain conditions imposed under SEC rules, obligations guaranteed by persons which meet the requisite rating requirements.
Illiquid Securities. The Portfolio may not invest more than 10% of its net assets in illiquid securities (including repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of
Directors. The Money Market Portfolio repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolio may purchase securities which are not registered under the Securities Act but which may 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 Portfolio's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Portfolio's investment adviser will monitor the liquidity of restricted securities in the Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Investment Limitations
The Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with such borrowing, and then in amounts not in excess of 10% of the value of a Portfolio's total assets at the time
of the borrowing and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration, the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Sansom Street Class Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization (as defined in the Prospectus), are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Arnold M. Reichman -50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and
Executive Officer of Counsellors
Securities Inc.; Director/Trustee of
various investment companies advised
by Warburg Pincus Asset Management,
Inc.
Robert Sablowsky -59* Director Senior Vice President, Fahnestock Co.,
110 Wall Street Inc. (a registered broker-dealer); Prior
New York, NY 10005 to October 1996, Executive Vice
President of Gruntal & Co., Inc. (a
registered broker-dealer).
Francis J. McKay -61 Director Since 1963, Executive Vice President,
7701 Burholme Avenue Fox Chase Cancer Center (biomedical
Philadelphia, PA 19111 research and medical care).
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Marvin E. Sternberg -63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies and
precision coated abrasives); since 1968,
Director and President, Mart MMM, Inc.
(formerly Montgomeryville Merchandise
Mart Inc.) and Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart, Inc.)
(shopping centers); and since 1975,
Director and Executive Vice President,
Cellucap Mfg. Co., Inc. (manufacturer of
disposable headwear).
Julian A. Brodsky -64 Director Director and Vice Chairman since 1969,
1234 Market Street Comcast Corporation (cable television
16th Floor and communications); Director, Comcast
Philadelphia, PA 19107-3723 Cablevision of Philadelphia (cable
television and communications) and
Nextel (wireless communications).
Donald van Roden -73 Director Self-employed businessman. From
1200 Old Mill Lane and February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman Chairman, SmithKline Beecham Corporation
of the (pharmaceuticals); Director, AAA
Board Mid-Atlantic (auto service); Director,
Keystone Insurance Co.
Edward J. Roach -74 President Certified Public Accountant; Vice
Suite 100 And Chairman of the Board, Fox Chase Cancer
Bellevue Park Treasurer Center; Trustee Emeritus, Pennsylvania
Corporate Center School for the Deaf; Trustee Emeritus,
400 Bellevue Parkway Immaculata College; President or Vice
Wilmington, DE 19809 President and Treasurer of various
investment companies advised by
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
BlackRock Institutional Management
Corporation; Director, The Bradford
Funds, Inc.
Morgan R. Jones -59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP; Director, Rocking
1345 Chestnut Street Horse Child Care Centers of America, Inc.
Philadelphia, PA 19107-3496
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser or sub-adviser of the Fund or the Distributor, and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of the Fund and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
Pension or
Aggregate Retirement Benefits Estimated Annual
Name of Person/ Compensation Accrued as Part of Benefits Upon
Position from Registrant Fund Expenses Retirement
--------------- --------------- ------------------- ----------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund will contribute on quarterly basis amounts equal to 10% of the quarterly compensation of each eligible employee. By virtue of the services performed by Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolio's adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolio has an investment advisory agreement with BIMC. Although BIMC in turn has a sub-advisory agreement respecting the Portfolio with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreement, PNC Bank would be entitled to receive a fee from
BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Portfolio. The advisory agreement Portfolio is dated August 16, 1988. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Money Market $ $ $
Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Money Market $5,366,431 $3,603,130 $469,986
Portfolio
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For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Money Market $4,174,375 $3,527,715 $342,158
Portfolio
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The Portfolio bears all of its own expenses not specifically assumed by BIMC.
General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by the
Fund to its directors and officers; (g) organizational costs; (h) fees paid to
the investment adviser and PFPC; (i) fees and expenses of officers and directors
who are not affiliated with the Portfolios' investment adviser or Distributor;
(j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees;
(o) brokerage fees and commissions; (p) certain of the fees and expenses of
registering and qualifying the Portfolios and their shares for distribution
under federal and state securities laws; (q) expenses of preparing prospectuses
and statements of additional information and distributing annually to existing
shareholders that are not attributable to a particular class of shares of the
Fund; (r) the expense of reports to shareholders, shareholders' meetings and
proxy solicitations that are not attributable to a particular class of shares of
the Fund; (s) fidelity bond and directors' and officers' liability insurance
premiums; (t) the expense of using independent pricing services; and (u) other
expenses which are not expressly assumed by the Portfolio's investment adviser
under its advisory agreement with the Portfolio. The Sansom Street Classes of
the Fund pay their own distribution 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
Sansom Street Classes or if they receive different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved on July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved by the shareholders of the Portfolio at a special meeting held December 22, 1989, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreement. BIMC is obligated to render administrative services to the Money Market Portfolio pursuant to the investment advisory agreement. Pursuant to the terms of a Delegation Agreement, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to the Money Market Portfolio. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After waivers and Reimburse-
Portfolio reimbursements) Waivers ments
--------- ------------------ ------- ----------
Money Market Portfolio
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Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the Portfolio, (b) holds and transfers portfolio securities on account of the Portfolio, (c) accepts receipts and makes disbursements of money on behalf of the Portfolio, (d) collects and receives all income and other payments and distributions on account of the Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning the Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon the Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend
disbursing agent for the Fund's Sansom Street Shares pursuant to a Transfer
Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under
which PFPC (a) issues and redeems shares of the Sansom Street Class, (b)
addresses and mails all communications by the Sansom Street Class to record
owners of shares of each such Class, including reports to shareholders, dividend
and distribution notices and proxy materials for its meetings of shareholders,
(c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes
periodic reports to the Fund's Board of Directors concerning the operations of
the Sansom Street Class. PFPC may, on 30 days' notice to the Fund, assign its
duties as transfer and dividend disbursing agent to any other affiliate of PNC
Bank Corp. For its services to the Fund under the Transfer Agency Agreement,
PFPC receives a fee at the annual rate of $15.00 per account in the Portfolio
for orders placed via third parties and relayed electronically to PFPC, and
$17.00 per account in the Portfolio for all other orders, exclusive of
out-of-pocket expenses and also receives a fee for each redemption check cleared
and reimbursement of its out-of-pocket expenses.
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, entered into by the Distributor and the Fund on behalf of the Sansom Street Class (the "Distribution Agreement"), and the Plan of Distribution, as amended, for the Sansom Street Class (the "Plan"), both of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of the Sansom Street Class. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus.
The Plan as amended was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to the Plan ("12b-1 Directors").
Among other things, the Plan provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Sansom Street Class under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares of the affected Sansom Street Class; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the Robertson Stephens Money Market
Portfolio in the aggregate amount of $_____. Of that amount, $_____ was paid to dealers with whom PDI had entered into dealer agreements, and $_____ was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the Plans for the Robertson Stephens Money Market Portfolio in the aggregate amount of $_____. Of that amount, $_____ was paid to dealers with whom Counsellors had entered into dealer agreements and $______ was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plan by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
As stated in the Prospectus for the Sansom Street Class, the Fund has adopted a Shareholder Servicing Plan on behalf of the Sansom Street Classes under which the Fund may enter into service agreements with banks that are affiliated with PNC Bank Corp. (the "Banks"). The Plan provides that banks (the "Banks") that are recordholders of Shares of the Sansom Street classes may receive a fee of up to .20% under the Plan for services to their customers ("Customers") who are beneficial owners of Shares. The Fund has entered into agreements with the Banks pertaining to the provision of support services to the Banks' Customers in consideration of the Fund's payment of .10% (on an annualized basis) of the net asset value of such Customers' Shares. Such services include: (i) aggregating and processing purchase and redemption requests from their Customers and placing net purchase and redemption orders with the PFPC; (ii) periodically providing their Customers information showing their positions in shares; (iii) processing dividend payments from the Fund on behalf of their Customers; (iv) arranging for bank wires; (v) responding to their Customer inquiries relating to the services performed by the service organization; (vi) providing sub-accounting with respect to Shares beneficially owned by their Customers or the information necessary for sub-accounting; (vii) forwarding shareholder communications from the Fund (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to their customers, if required by law; and (viii) other similar services if requested by the Fund. The Banks also agree to maintain records relating to transactions in Shares, and to provide the Fund with such statistical and factual information as the Fund may request. Agreements between the Fund and the Banks are terminable at any time by the Fund without penalty. The Distributor will monitor the support services provided by the Banks under such agreements.
During the year ended August 31, 1998, the Fund paid fees to Banks under the relevant agreement for the Sansom Street Class of the Money Market Portfolio
in the amount of _________. During the year ended August 31, 1997, the Fund paid fees to Banks under the relevant agreement for the Sansom Street Class of the Money Market Portfolio in the amount of $535,524. During the year ended August 31, 1996, the Fund paid fees to Banks under the relevant agreement for the Sansom Street Class of the Money Market Portfolio in the amount of $471,499.
PORTFOLIO TRANSACTIONS
The Portfolio intends to purchase only securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that the Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because the Portfolio intends to purchase only securities with remaining maturities of 13 months or less, its portfolio turnover rate will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by the Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolio does not intend to seek profits through short term trading.
Purchases of portfolio securities by the Portfolio are made from dealers, underwriters and issuers; sales are made to dealers and issuers. The Portfolio does not currently expect to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of the Portfolio to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of the Portfolio, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC 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 Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that the Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for the Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. The Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is the member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of RBB's regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing the Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of the Portfolio.
Under the 1940 Act, the Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
A shareholder of record may be required by the Fund's Board of Directors to redeem shares in the Class if the balance in such shareholder's account drops below $500 and the shareholder does not increase its balance to at least $500 upon 30 days' written notice. If a Customer has agreed with a particular Bank to maintain a minimum balance in his account, and the balance in the Bank account falls below that minimum, the Customer may be obliged to redeem all or part of his shares in the Portfolio to the extent necessary to maintain the minimum balance required.
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolio at $1.00 per share. Net asset value per share, the value of an individual share in the Portfolio, is computed by adding the value of the proportionate interest of the class in a Portfolio's cash, securities, and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is determined independently of each other class. The Portfolio's "net assets" equal the value of the Portfolio's investments and other securities less its liabilities. The Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each weekday when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Veterans' Day and Columbus Day.
The Fund calculates the value of the portfolio securities of the Portfolio by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, the Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price the Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for the Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for the Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
The Portfolio will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity greater than 13 months under Rule 2a-7 of the 1940 Act, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
The Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for the Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
The annualized yield for the seven-day period ended August 31, 1998 for the Sansom Street Class of the Money Market Portfolio before waivers was as follows:
Tax Equivalent Yield
(assumes a federal)
Effective income
Portfolio Yield Yield tax rate of 28%)
--------- ----- --------- ------------------
Money Market N/A
Portfolio
|
The annualized yield for the seven-day period ended August 31, 1998 for the Sansom Street Class of the Money Market Portfolio after waivers was as follows:
Tax Equivalent Yield
(assumes a federal
Effective income
Portfolio Yield Yield tax rate of 28%)
--------- ----- --------- ------------------
Money Market N/A
Portfolio
|
Total return and yield may fluctuate daily and do not provide a basis for determining future returns and yields. Because the return and yield of the Portfolio will fluctuate, it cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of a portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which the Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by the Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether the Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the return and/or yield of the Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of the Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and to distribute its income to
shareholders each year, to that the Portfolio generally will be relieved of
federal income and excise taxes. If the Portfolio were to fail to so qualify:
(1) the Portfolio would be taxed at regular corporate rates without any
deduction for distributions to shareholders; and (2) shareholders would be taxed
as if they received ordinary dividends, although corporate shareholders could be
eligible for the dividends received deduction.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class J Common Stock constitute the Sansom Street Class, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a
meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of ____________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
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As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998
Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"CCC", "CC", and "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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
SANSOM STREET FAMILY
Money Market Portfolio,
Municipal Money Market Portfolio and
Government Obligations Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of three classes (the "Sansom Street Shares") representing interests in three investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Sansom Street Family Prospectus of the Fund, dated _______, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ________, 1998.
CONTENTS
Prospectus
Page Page
---- ----------
General.................................................................................
Investment Objectives and Policies......................................................
Directors and Officers..................................................................
Investment Advisory, Distribution and Servicing Arrangements............................
Portfolio Transactions..................................................................
Purchase and Redemption Information.....................................................
Valuation of Shares.....................................................................
Performance Information.................................................................
Taxes...................................................................................
Additional Information Concerning Fund Shares...........................................
Miscellaneous...........................................................................
Financial Statements....................................................................
Appendix A...........................................................................A-1
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment
company currently operating or proposing to operate seventeen separate
investment portfolios. This Statement of Additional Information pertains to
three classes of shares (the "Sansom Street Classes") each representing
interests in one of three investment portfolios (the "Portfolios") of the Fund:
the Money Market Portfolio, the Municipal Money Market Portfolio and the
Government Obligations Money Market Portfolio. The Sansom Street Classes are
offered by the Prospectus dated ________, 1998. The Fund was organized as a
Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market Portfolio or the Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right, and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market and Municipal Money Market Portfolios may purchase "when- issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market Portfolio or the Municipal Money Market Portfolio has such commitments outstanding, they will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that a Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because a Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, it is expected that commitments to purchase "when issued" securities will not exceed 25% of the value of a Portfolio's total assets absent unusual market conditions. When either the Money Market Portfolio or the Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market Portfolio and the Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio or the Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio and the Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either of such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by either such Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio and the Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. These Portfolios' reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio and the Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio
owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 Portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark-to-market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market and Government Obligations Money Market Portfolios may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMO interests. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities, (2) securities that
(a) are rated (at the time of purchase) by two or more nationally recognized
statistical rating organizations ("Rating Organizations") in the two highest
rating categories for such securities (e.g., commercial paper rated "A-1" or
"A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at
the time of purchase) by the only Rating Organization rating the security in one
of its two highest rating categories for such securities; (3) short-term
obligations and subject to certain SEC requirements; long-term obligations that
have remaining maturities of 13 months or less, provided in each instance that
such obligations have no short-term rating and are comparable in priority and
security to a class of short-term obligations of the issuer that has been rated
in accordance with (2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have
comparable obligations rated by a Rating Organization ("Unrated Securities"),
provided that such securities are determined to be of comparable quality to a
security satisfying (2) or (3) above; and (5) subject to certain conditions
imposed under SEC rules, obligations guaranteed by persons which meet the requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio and the Government Obligations Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of 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.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Investment Limitations
Money Market Portfolio and Municipal Money Market Portfolio. Neither the Money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax; (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be
changed without the affirmative vote of the holders of a majority of the Money Market Portfolio's outstanding shares, but any such would be subject to any applicable requirements of the Securities and Exchange Commission ("SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization (as defined in the Prospectus), are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if after the acquisition of the Put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to Puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "Put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor
its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Act as an underwriter.
4. Make loans, except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name and Address and Age Position with Fund During Past Five Years
------------------------ ------------------ ----------------------
Arnold M. Reichman, 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and
Executive Officer of Counsellors
Securities Inc.; Director/Trustee
of various investment companies
advised by Warburg Pincus Asset
Management, Inc.
Robert Sablowsky, 59* Director Senior Vice President, Fahnestock Co.,
110 Wall Street Inc. (a registered broker-dealer);
New York, NY 10005 prior to October 1996, Executive Vice
President of Gruntal & Co., Inc.,
(a registered broker-dealer).
Francis J. McKay, 61 Director Since 1963, Executive Vice President,
7701 Burholme Avenue Fox Chase Cancer Center (biomedical
Philadelphia, PA 19111 research and medical care).
Marvin E. Sternberg, 63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies and
precision coated abrasives); since
1968, Director and President, Mart MMM,
Inc. (formerly Montgomeryville
Merchandise Mart Inc.) and Mart PMM,
Inc. (formerly Pennsauken Merchandise
Mart, Inc.) (shopping centers); and
since 1975, Director and Executive Vice
President, Cellucap Mfg. Co., Inc.
(manufacturer of disposable headwear).
Julian A. Brodsky, 64 Director Director and Vice-Chairman since 1969
1234 Market Street Comcast Corporation (cable television
16th Floor and communications); Director, Comcast
Philadelphia, PA 19107-3723 Cablevision of Philadelphia (cable
television and communications) and
Nextel (wireless communications).
-13-
|
Donald van Roden, 73 Director and Chairman of Self-employed businessman. From
1200 Old Mill Lane the Board February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.
Edward J. Roach, 74 President and Treasurer Certified Public Accountant; Vice
Suite 100 Chairman of the Board, Fox Chase Cancer
Bellevue Park Center; Trustee Emeritus, Pennsylvania
Corporate Center School for the Deaf; Trustee Emeritus,
400 Bellevue Parkway Immaculata College; President or Vice
Wilmington, DE 19809 President and Treasurer of various
investment companies advised by
BlackRock Institutional Management
Corporation; Director, The Bradford
Funds, Inc.
Morgan R. Jones, 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse Child
Philadelphia, PA 19107-3496 Care Centers of America, Inc.
|
* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser of the Fund or the Distributor, and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
-----------------------
Pension or Retirement
Aggregate Compensation Benefits Accrued as Part of Estimated Annual Benefits
Name of Person/Position from Registrant Fund Expenses Upon Retirement
----------------------- ---------------------- --------------------------- -------------------------
Julian A. Brodsky, Director N/A N/A
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
|
On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee) pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC")(formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the Municipal Money Market Portfolio's administrator and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only
two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market, Municipal Money Market and Government Obligations Portfolios. The advisory agreements relating to the Money Market and Government Obligations Money Market Portfolios are each dated August 16, 1988, and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market and Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ------------------ ------- --------------
Money Market Portfolio
Municipal Money Market Portfolio
Government Obligations Money Market
Portfolio
|
For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ------------------ ------- --------------
Money Market Portfolio $ 5,366,431 $ 3,603,130 $ 469,986
Municipal Money Market Portfolio $ 201,095 $ 1,269,553 $ 14,921
Government Obligations Money Market $ 1,774,123 $ 647,063 $ 404,193
Portfolio
|
For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ------------------ ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money Market Portfolio $ 190,687 $1,218,973 $ 17,576
Government Obligations Money Market $1,638,622 $ 671,811 $406,954
Portfolio
|
Each Portfolio bears all of its own expenses not specifically assumed by BIMC. General expenses of the Fund not readily identifiable as belonging to a portfolio of the Fund are allocated among all investment portfolios by or under the direction of the Fund's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of a portfolio by BIMC; (c) expenses of organizing the Fund that are not attributable to a class of the Fund; (d)
certain of the filing fees and expenses relating to the registration and
qualification of the Fund and a portfolio's shares under Federal and/or state
securities laws and maintaining such registrations and qualifications; (e) fees
and salaries payable to the Fund's directors and officers; (f) taxes (including
any income or franchise taxes) and governmental fees; (g) costs of any liability
and other insurance or fidelity bonds; (h) any costs, expenses or losses arising
out of a liability of or claim for damages or other relief asserted against the
Fund or a portfolio for violation of any law; (i) legal, accounting and auditing
expenses, including legal fees of special counsel for the independent directors;
(j) charges of custodians and other agents; (k) expenses of setting in type and
printing prospectuses, statements of additional information and supplements
thereto for existing shareholders, reports, statements, and confirmations to
shareholders and proxy material that are not attributable to a class; (l) costs
of mailing prospectuses, statements of additional information and supplements
thereto to existing shareholders, as well as reports to shareholders and proxy
material that are not attributable to a class; (m) any extraordinary expenses;
(n) fees, voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; (o) costs of mailing and
tabulating proxies and costs of shareholders' and directors' meetings; (p) costs
of BIMC's use of independent pricing services to value a portfolio's securities;
and (q) the cost of investment company literature and other publications
provided by the Fund to its directors and officers. The Sansom Street classes of
the Fund pay their own distribution fees, and may pay a different share than
other classes of the Fund (excluding advisory and custodial fees) if those
expenses are actually incurred in a different amount.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Money Market and Government Obligations Money Market Portfolios by the shareholders of each Portfolio at a special meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned and the sub-advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreement. PFPC serves as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (the "Administration Agreement"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market Portfolio, statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare
and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or the Portfolio in connection with the performance of the Agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreement, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market Portfolio.
BIMC is obligated to render administrative services to the Money Market and Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of Delegation Agreements, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Portfolios Fees Paid Waivers Reimbursements ---------- --------- ------- -------------- Municipal Money Market Portfolio Money Market Portfolio Government Obligations Money Market Portfolio |
For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Portfolios Fees Paid Waivers Reimbursements ---------- --------- ------- -------------- Municipal Money Market Portfolio $ 448,548 $ 0 $ 0 |
For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Portfolios Fees Paid Waivers Reimbursements ---------- --------- ------- -------------- Municipal Money Market Portfolio $ 428,209 $ 0 $ 0 |
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a)
maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Shares pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems Shares, each such Portfolio, including reports to (b) addresses and mails all communications by each Portfolio to record owners of Shares of shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Portfolio. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
Distribution and Servicing Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 entered into by the Distributor and the Fund on behalf of each of the Sansom Street Classes (the "Distribution Agreement"), and separate Plans of Distribution, as amended, for each of the Sansom Street Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Sansom Street Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreements, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus.
Each of the Plans was approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plans and the purposes for which such expenditures were made, including commissions, advertising, printing, interest,
carrying charges and any allocated overhead expenses; (2) the Plans will continue in effect only so long as they are approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Sansom Street Class under the Plans shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Sansom Street Class; and (4) while the Plans remain in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the Sansom Street Classes of each of the Money Market Portfolio, Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio in the aggregate amounts of $_____, $_____, and $_____, respectively. Of those amounts, $_____, $_____, and $____, respectively, was paid to dealers with whom PDI had entered into dealer agreements, and $_____, $______, and $_____, respectively, was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the Plans for the Sansom Street Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio and the Government Obligations Money Market Portfolio in the aggregate amounts of $_____, $_____, and $______, respectively. Of these amounts, $______, $______, and $_____, respectively, was paid to dealers with whom Counsellors had entered into dealer agreements, and $______, $______, and $______, respectively, was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his respective position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
As stated in the Prospectus for the Sansom Street Classes, the Fund has adopted a Shareholder Servicing Plan on behalf of the Sansom Street Classes under which the Fund may enter into service agreements with banks that are affiliated with PNC Bank Corp. (the "Banks"). The Plan provides that the Banks that are recordholders of shares of the Sansom Street Classes may receive a fee
of up to .20% under the Plan for services to their customers who are beneficial
owners of shares of the Sansom Street Classes ("Customers"). The Fund has
entered into agreements with the Banks pertaining to the provision of support
services to the Customers in consideration of the Fund's payment of .10% (on an
annualized basis) of the net asset value of such Shares. Such services include:
(i) aggregating and processing purchase and redemption requests from Customers
and placing net purchase and redemption orders with the PFPC; (ii) periodically
providing Customers information showing their positions in shares; (iii)
processing dividend payments from the Fund on behalf of Customers; (iv)
arranging for bank wires; (v) responding to Customer inquiries relating to the
services performed by the service organization; (vi) providing sub-accounting
with respect to shares of the Sansom Street Classes beneficially owned by
Customers or the information necessary for sub-accounting; (vii) forwarding
shareholder communications from the Fund (such as proxies, shareholder reports,
annual and semi-annual financial statements and dividend, distribution and tax
notices) to Customers, if required by law; and (viii) other similar services if
requested by the Fund. The Banks also agree to maintain records relating to
transactions in shares of the Sansom Street Classes, and to provide the Fund
with such statistical and factual information as the Fund may request.
Agreements between the Fund and the Banks are terminable at any time by the Fund
without penalty. The Distributor will monitor the support services provided by
the Banks under such agreements.
During the year ended August 31, 1998, the Fund paid fees to Banks under the relevant agreements for the Sansom Street Classes of each of the Money Market Portfolio, Municipal Money Market Portfolio and Government Obligations Money Market Portfolio in the amount of $________, $________and $_________, respectively.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Money Market Portfolio and Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly
from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following Portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
A shareholder of record may be required by the Fund's Board of Directors to redeem shares in any Class if the balance in such shareholder's account drops below $500 and the shareholder does not increase its balance to at least $500 upon 30 days' written notice. If a Customer has agreed with a particular Bank to maintain a minimum balance in his account, and the balance in the Bank account falls below that minimum, the Customer may be obliged to redeem all or part of his shares in each Portfolio to the extent necessary to maintain the minimum balance required.
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of the class in a Portfolio'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. The net asset value of each class of the Fund is determined independently of the other classes of the Fund. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. Each Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. (Eastern Time), on each Business Day. "Business Day" means each weekday when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday, when one of the holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays the NYSE as well as Veterans' Day and Columbus Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference
between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity greater than 13 months under Rule 2a-7 of the 1940 Act, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
The annualized yield for the seven-day period ended August 31, 1998 for the Sansom Street Class of the Money Market Portfolio before waivers was as follows:
Tax-Equivalent Yield
(assumes a federal income
Portfolio Yield Effective Yield tax rate of 28%)
--------- ----- --------------- -------------------------
Money Market Portfolio N/A
|
The annualized yield for the seven-day period ended August 31, 1998 for the Sansom Street Class of the Money Market Portfolio after waivers was as follows:
Tax-Equivalent Yield
(assumes a federal income
Portfolio Yield Effective Yield tax rate of 28%)
--------- ----- --------------- ------------------------
Money Market Portfolio N/A
|
During the foregoing time period, Shares of the Sansom Street Classes of the Municipal Money Market and Government Obligations Money Market Portfolios were not offered.
Total return and yield may fluctuate daily and do not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of the Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million
shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock
(Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class I Common Stock, Class J Common Stock and Class K Common Stock constitute the Sansom Street, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable
vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of _________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
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BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
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As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory or sub-advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
THE PRINCIPAL CLASS
Money Market Portfolio
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of the Principal Class (the "Principal Shares" or "Shares") which represent interests in the Money Market Portfolio, an investment portfolio (the "Portfolio") of The RBB Fund, Inc. (the "Fund"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Principal Class Prospectus of the Fund, dated ______________, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ____________, 1998.
CONTENTS
Prospectus
Page Page
---- ----------
General............................................................................2
Investment Objectives and Policies.................................................2
Directors and Officers............................................................11
Investment Advisory, Distribution and Servicing Arrangements......................14
Portfolio Transactions............................................................18
Purchase and Redemption Information...............................................19
Valuation of Shares...............................................................20
Performance Information...........................................................21
Taxes .........................................................................22
Additional Information Concerning Fund Shares.....................................25
Miscellaneous.....................................................................26
Financial Statements..............................................................27
Appendix A.......................................................................A-1
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to the Principal Class of shares (the "Principal Class") representing interests in one of the investment portfolios (the "Portfolio") of the Fund: the Money Market Portfolio of the Fund. The Principal Class is offered by the Prospectus dated ________________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolio. A description of ratings of Municipal Obligations (defined below) and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by the Portfolio pursuant to the Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. In determining whether an unrated variable rate demand instrument is an eligible security, the Portfolio's investment adviser will follow guidelines adopted by the Fund's Board of Directors.
The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for the Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Portfolio may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Portfolio has such commitments outstanding, it will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, the Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Portfolio's commitment. It may be expected that the Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because the Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, it is expected that commitments to purchase "when issued" securities will not exceed 25% of the value of the Portfolio's total assets absent unusual market conditions. When the Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. The Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
The Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, the Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Portfolio will not exceed 1/2 of 1% of the value of the Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
The Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. The Portfolio's reliance upon the credit of these dealers,
banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where the Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by the Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section 4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements
described in the Prospectus generally equals the price paid by the Portfolio
plus interest negotiated on the basis of current short-term rates (which may be
more or less than the rate on the securities underlying the repurchase
agreement). The financial institutions with which the Portfolio 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 Portfolio's adviser or sub-advisor. A Portfolio's adviser or sub-advisor
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 Portfolio's
adviser or sub-advisor 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 either (i) accrued premium provided in the repurchase agreement or
(ii) the daily amortization of the difference between the purchase price and the
repurchase price specified in the repurchase agreement. The Portfolio's adviser
or sub-advisor will mark-to-market daily the value of the securities. Securities
subject to repurchase agreements will be held by the Fund's custodian in the
Federal Reserve/Treasury book-entry system or by another authorized securities
depository. Repurchase agreements are considered to be loans by the Portfolio
under the 1940 Act.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by the Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The two principal classifications of Municipal Obligations are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds that are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal obligations may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Mortgage-Related Securities. There are a number of important differences
among the agencies and instrumentalities of the U.S. Government that issue
mortgage-related securities and among the securities that they issue.
Mortgage-related securities guaranteed by the Government National Mortgage
Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known
as "Ginnie Maes") which are guaranteed as to the timely payment of principal and
interest by GNMA and such guarantee is backed by the full faith and credit of
the United States. GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA, are not backed by or entitled to the full faith and
credit of the United States and are supported by the right of the issuer to
borrow from the Treasury. FNMA is a government-sponsored organization owned
entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA. Mortgage-related securities issued by
the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the amount due
on account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable.
The Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMO interests. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include (1) U.S. Government securities, (2) securities that (a) are rated (or, in certain cases, whose guarantor is rated) at the time of purchase by two or more Rating Organizations (as defined in the Prospectus) in the two highest rating categories for such securities (e.g., commercial paper rated "A-1" or "A-2" by S&P, or "Prime-1" or "Prime-2" by Moody's), or (b) are rated (or, in certain cases, whose guarantor is rated) at the time of purchase by the only Rating Organization rating the security in one of its two highest rating categories for such securities; (3) securities that have no short term rating (or securities with a guarantee with no such rating), but which are (or whose guarantee is) in priority and security to a class of short-term obligations of the issuer or provider that has been rated in accordance with 2(a) or (b) above ("comparable obligations"); and (4) securities that are not (or whose guarantor is not) rated and are issued that do not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are (or their guarantee is) determined to be of comparable quality to a security satisfying (2) or (3) above.
Illiquid Securities. The Portfolio may not invest more than 10% of its net assets in illiquid securities (including repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. The Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. The Portfolio's repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolio may purchase securities which are not registered under the Securities Act but which may 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 Portfolio's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Portfolio's investment adviser will monitor the liquidity of restricted securities in the Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Investment Limitations
The Portfolio may not:
(1) borrow money, except from banks for temporary purposes and for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge or hypothecate any of its assets except in connection with such borrowing and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of the borrowing and in amounts not in excess of the lesser of the dollar amounts borrowed or; 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Principal Class Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Portfolio.
1. The Portfolio will limit its purchases of the securities (other than securities with certain guarantees) of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" generally include eligible securities that (i) if rated (or guaranteed by a person which has been rated) by more than one Rating Organization (as defined in the Prospectus), are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated (or guaranteed by a person which has been rated) by only one Rating Organization, are rated by such Rating Organization in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) (or have a guarantee which satisfies this standard) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities (or have a guarantee which satisfies this standard). The Portfolio's compliance with this diversification requirement is deemed to be in compliance with the fundamental diversification limit in paragraph 2 above.
2. The Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name and Address and Age Position with Fund During Past Five Years
------------------------ ------------------ ----------------------
Arnold M. Reichman - 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and
Executive Officer of Counsellors
Securities Inc.; Director/Trustee
of various investment companies
advised by Warburg Pincus Asset
Management, Inc.
Robert Sablowsky - 59* Director Senior Vice President, Fahnestock
110 Wall Street Co., Inc. (a registered
New York, NY 10005 broker-dealer); Prior to October
1996, Executive Vice President of
Gruntal & Co., Inc. (a registered
broker-dealer.
Francis J. McKay - 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer Center
Philadelphia, PA 19111 (biomedical research and medical
care).
Marvin E. Sternberg -- 62 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies
and precision coated abrasives);
since 1968, Director and President,
Mart MMM, Inc. (formerly
Montgomeryville Merchandise Mart
Inc.) and Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart Inc.)
(shopping centers); and since 1975,
Director and Executive Vice
President, Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
-13-
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Julian A. Brodsky - 64 Director Director and Vice Chairman since
1234 Market Street 1969, Comcast Corporation (cable
16th Floor television and communications);
Philadelphia, PA 19107-3723 Director, Comcast Cablevision of
Philadelphia (cable television
and communications) and Nextel
(wireless communications).
Donald van Roden - 73 Director and Chairman of the Self-employed businessman. From
1200 Old Mill Lane Board February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.
Edward J. Roach - 74 President and Treasurer Certified Public Accountant; Vice
Suite 100 Chairman of the Board, Fox Chase
Bellevue Park Cancer Center; Trustee Emeritus,
Corporate Center Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata
Wilmington, DE 19809 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 - 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse
Philadelphia, PA 19107-3496 Child Care Centers of
America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund as that term is defined in the 1940 Act by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities Inc., respectively, each a registered broker-dealers.
Messrs. McKay, Sternberg and Brodsky are members of the Audit Committee of the Board of Directors. The Audit Committee, among other things, reviews results of the annual audit and recommends to the Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors, $12,000 annually and $1,250 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 additional fee of $6,000 per year for his services in this capacity. Directors and Mr. Reichman are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
-----------------------
Pension or
Retirement
Aggregate Benefits Estimated Annual
Compensation from Accrued as Part Benefits Upon
Name of Person/ Position Registrant of Fund Expenses Retirement
------------------------ ----------------- ---------------- ----------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee) pursuant to which the Fund 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 BlackRock Institutional Management Corporation ("BIMC")(formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank") the Fund's custodian, PFPC Inc. ("PFPC"), the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund 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 Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory Agreement and Sub-Advisory Agreements. The Portfolio has an investment advisory agreement with BIMC. Although BIMC in turn has a sub-advisory agreement respecting the Portfolio with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreement, PNC Bank would be entitled to receive an annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Portfolio. The advisory agreement relating to the Portfolio is dated August 16, 1988. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements".
For the period ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and Reimburse-
Fiscal Year Ended reimbursements) Waivers ments
----------------- --------------- ------- ----------
August 31, 1998
August 31, 1997 $5,366,431 $3,527,715 $469,986
August 31, 1996 $4,174,375 $3,527,715 $342,158
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The Portfolio bears all of its own expenses not specifically assumed by
BIMC. General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by the
Fund to its directors and officers; (g) organizational costs; (h) fees paid to
the investment adviser and PFPC; (i) fees and expenses of officers and directors
who are not affiliated with the Portfolios' investment adviser or Distributor;
(j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees;
(o) brokerage fees and commissions; (p) certain of the fees and expenses of
registering and qualifying the Portfolios and their shares for distribution
under federal and state securities laws; (q) expenses of preparing prospectuses
and statements of additional information and distributing annually to existing
shareholders that are not attributable to a particular class of shares of the
Fund; (r) the expense of reports to shareholders, shareholders' meetings and
proxy solicitations that are not attributable to a particular class of shares of
the Fund; (s) fidelity bond and directors' and officers' liability insurance
premiums; (t) the expense of using independent pricing services; and (u) other
expenses which are not expressly assumed by the Portfolio's investment adviser
under its advisory agreement with the Portfolio. The Principal Class of the Fund
pays its own distribution 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 Principal
Class or if it receives different services.
Under the Advisory Agreement, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Portfolio in connection with the performance of the Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of its respective duties or from reckless disregard of its duties and obligations thereunder.
The Advisory Agreements were most recently approved on July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were approved by the shareholders of the Portfolio at a special meeting held December 22, 1989, as adjourned. The Advisory Agreements are terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. The Advisory Agreement may also be terminated by BIMC or PNC Bank on 60 days' written notice to the Fund. Each of the Advisory Agreements terminate automatically in the event of assignment thereof.
Administrative Services. BIMC is obligated to render administrative services to the Money Market Portfolio pursuant to the investment advisory agreement. Pursuant to the terms of a Delegation Agreement, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to this Portfolio. The Fund pays administrative fees directly to PFPC.
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 (the "Distribution Agreement"), the Distributor will use appropriate efforts to distribute shares of the Fund. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee of 0.01%, to be calculated daily and paid monthly. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
The amounts retained by PDI will be used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment sales, marketing and administrative expenses. The Fund believes that the Portfolio's 12b-1 Plan may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the 12b-1 Plan by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the Portfolio (b) holds and transfers portfolio securities on account of the Portfolio, (c) accepts receipts and makes disbursements of money on behalf of the Portfolio, (d) collects and receives all income and other payments and distributions on account of the Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning the Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible
for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon the Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Principal Shares pursuant to a Transfer Agency Agreement dated _______________, 1998 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of the Principal Class, (b) addresses and mails all communications by the Principal Class to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of the Principal Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in the Portfolio for orders placed via third parties and relayed electronically to PFPC, and $17.00 per account in the Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PORTFOLIO TRANSACTIONS
The Portfolio intends to purchase only securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that the Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because the Portfolio intents to purchase only securities with remaining maturities of 13 months or less, its portfolio turnover rate will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by the Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolio does not intend to seek profits through short-term trading.
Purchases of portfolio securities by the Portfolio are made from dealers, underwriters and issuers; sales are made to dealers and issuers. The Portfolio does not currently expect to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of
compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of the Portfolio to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of the Portfolio, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC 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 Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that the Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for the Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. The Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is the member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing the Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of the Portfolio.
Under the 1940 Act, the Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
A shareholder of record may be required by the Fund's Board of Directors to redeem shares in the Class if the balance in such shareholder's account drops below $500 and the shareholder does not increase its balance to at least $500 upon 30 days' written notice. If a Customer has agreed with a particular PNC Bank to maintain a minimum balance in his account, and the balance in the PNC Bank account falls below that minimum, the Customer may be obliged to redeem all or part of his shares in the Portfolio to the extent necessary to maintain the minimum balance required.
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolio at $1.00 per share. Net asset value per share, the value of an individual share in the Portfolio, is computed by adding the value of the proportionate interest of the class in a Portfolio's cash, securities and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is determined independently of each other class. The Portfolio's "net assets" equal the value of the Portfolio's investments and other securities less its liabilities. The Portfolio's net asset value per share is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each weekday when both the
NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Veterans' Day and Columbus Day.
The Fund calculates the value of the portfolio securities of the Portfolio by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, the Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price the Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for the Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for the Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
The Portfolio will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity greater than 13 months under Rule 2a-7 of the 1940 Act, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
The Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for the Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
Performance may fluctuate daily and does not provide a basis for determining future performance. Because the performance of the Portfolio will fluctuate, they cannot be compared with performance on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, performance information may be useful to an investor considering temporary investments in money market instruments. In comparing the performance of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of a portfolio's securities, the method used by each fund to compute the performance (methods may differ) and whether there are any special account charges which may reduce the effective performance.
The yields and returns on certain obligations, including the money market instruments in which the Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by the Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether the Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the yield and returns of the Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of the Portfolio may be compared to the
Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and to distribute its income to
shareholders each year, so that the Portfolio generally will be relieved of
federal income and excise taxes. If the Portfolio were to fail to so qualify:
(1) the Portfolio would be taxed at regular corporate rates without any
deduction for distributions to shareholders; and (2) shareholders would be taxed
as if they received ordinary dividends, although corporate shareholders could be
eligible for the dividends received deduction.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Class Select Common Stock, constitute the Select Class, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the
outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of _____________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning the Fund's Shares" above. The Fund does not know whether such persons also beneficially own such shares.
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
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BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
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Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
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BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
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Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
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National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
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Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
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BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
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CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
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C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
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BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
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BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
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BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
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Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
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Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
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Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
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Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
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FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
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Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
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BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
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Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
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New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
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Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
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BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling
or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BETA FAMILY
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of three classes (the "Beta Shares") representing interests in three investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Beta Family Prospectus of the Fund dated _____________, 1998, (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ____________, 1998.
CONTENTS
Prospectus
Page Page
---- ----------
General
Investment Objectives and Policies.............................................
Directors and Officers.........................................................
Investment Advisory, Distribution and Servicing Arrangements...................
Portfolio Transaction ........................................................
Purchase and Redemption Information............................................
Valuation of Shares............................................................
Performance Information........................................................
Taxes ......................................................................
Additional Information Concerning Fund Shares..................................
Miscellaneous..................................................................
Appendix A.....................................................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to three classes of shares (the "Beta Classes") representing interests in three investment portfolios (the "Portfolios") of the Fund: the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Beta Classes are offered by the Prospectus dated _____________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of Municipal Money Market or New York Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. The absence of an active secondary market with respect to particular variable
and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Municipal Money Market and New York Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Municipal Money Market or New York Municipal Money Market Portfolios have such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, such Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of such Portfolio's commitment. It may be expected that such Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because such Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, such Portfolio expects that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When any of the Municipal Money Market Portfolio or the New York Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Municipal Money Market Portfolio or New York Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities, which are acquired subject to the commitment (thus
reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. Any such Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation, which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law
affecting the issuance and use of proceeds of certain Municipal Obligations. A
new definition of
private activity bonds applies to many types of bonds, including those, which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark to market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Government Obligations Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs,
which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMOs. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money
Market Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities, (2) securities that
(a) are rated (at the time of purchase) by two or more nationally recognized
statistical rating organizations ("Rating Organizations") in the two highest
rating categories for such securities (e.g., commercial paper rated "A-1" or
"A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at
the time of purchase) by the only Rating Organization rating the security in one
of its two highest rating categories for such securities; (3) short-term
obligations and subject to certain SEC requirements; long-term obligations that
have remaining maturities of 13 months or less, provided in each instance that
such obligations have no short-term rating and are comparable in priority and
security to a class of short-term obligations of the issuer that has been rated
in accordance with (2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have
comparable obligations rated by a Rating Organization ("Unrated Securities"),
provided that such securities are determined to be of comparable quality to a
security satisfying (2) or (3) above; and (5) subject to certain conditions
imposed under SEC rules, obligations guaranteed by persons which meet the
requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Special Considerations Relating To New York Municipal Obligations. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional Information. The accuracy and completeness of the information contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies.
The forecast of the State's economy shows continued expansion during the 1998 calendar year, with employment growth gradually slowing as the year progresses. The financial and business service sectors are expected to continue to do well, while employment in the manufacturing and government sectors will post only small, if any, declines. On an average annual basis, the employment growth rate in the State is expected to be higher than in 1997 and the unemployment rate is expected to drop further to 6.1 percent. Personal income is expected to record moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the previous year as the recent robust growth in bonus payments moderates.
There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998-99 budget process. Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than-projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund spending offsets, and other actions necessary to bring projected disbursements and receipts into balance.
Other actions taken in the 1997-98 adopted budget add further pressure to future budget balance in the State. For example, the fiscal effects of tax reductions adopted in the 1997-98 budget are projected to grow more substantially beyond the 1998-99 fiscal year, with incremental costs averaging in excess of $1.3 billion annually over the last three years of the tax reduction program. These incremental costs reflect the phase-in of State-funded school property tax and local income tax relief, the phase-out of the assessments on medical providers, and reductions in estate and gift levies, utility gross receipts taxes, and the State sales tax on clothing. The full annual cost of the enacted tax reduction package is estimated at approximately $4.8 billion when fully effective in State fiscal year 2001-02. In addition, the 1997-98 budget included multi-year commitments for school aid and pre-kindergarten early learning programs which could add as much as $1.4 billion in costs when fully annualized in fiscal year 2001-02. These spending commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the 2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring
spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998-99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the School Tax Relief Program ("STAR"), expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million available for future needs, a balance of $400 million in the Tax Stabilization Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF is used to finance various legislative and executive initiatives. The CRF provides resource to help finance any extraordinary litigation costs during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1999 to 1998. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $62 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent.
The economic and financial condition of the State may be affected by various financial, social, economic and political factors. Those factors can be very complex, may vary from fiscal year to fiscal year, and are frequently the result of actions taken not only by the State and its agencies and instrumentalities, but also by entities, such as the federal government, that are not under the control of the State. In addition, the financial plan is based upon forecasts of national and State economic activity. Economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. Actual results, however, could differ materially and adversely from the projections
set forth in a financial plan, and those projections may be changed materially and adversely from time to time.
In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the Division of Budget believes it could take similar actions should variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes.
The State ended its 1997-98 fiscal year in balance on a cash basis, with a General Fund cash surplus as reported by DOB of approximately $2.04 billion. The cash surplus was derived primarily from higher-than-anticipated receipts and lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205 million from the prior fiscal year. The balance is held in three accounts within the General Fund: the Tax Stabilization Reserve Fund, the Contingency Reserve Fund and the Community Projects Fund. The TSRF closing balance was $400 million, following a required deposit of $15 million (repaying a transfer made in 1991-92) and an extraordinary deposit of $68 million made from the 1997-98 surplus. The CRF closing balance was $68 million, following a $27 million deposit from the surplus. The CPF, which finances legislative initiatives, closed the fiscal year with a balance of $170 million, an increase of $95 million. The General Fund closing balance did not include $2.39 billion in the tax refund reserve account, of which $521 million was made available as a result of the Local Government Assistance Corporation ("LGAC") financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year (including net tax refund reserve account activity) totaled $34.55 billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97. General Fund disbursements and transfers to other funds were $34.35 billion, an annual increase of $1.45 billion or 4.41 percent.
Debt Limits and Outstanding Debt. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general obligation borrowing (i.e.,
borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State.
The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms, lease-purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual-obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. The State does not anticipate that it will be called upon to make any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("S&P") reduced its ratings on the State's general obligation bonds from A to A- and, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, S&P revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget, will be released on or before July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year.
The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated that approximately $191 million will be issued to finance agency
equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems.
Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was released with the 1998-99 Executive Budget on January 20, 1998. As a part of that Plan, changes were proposed to the State's 1997-98 borrowing plan, including: the delay in the issuance of COPs to finance welfare information systems until 1998-99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to maintain proper housing; (4) alleged responsibility of New York State officials to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates;
(6) challenges to the constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non-Indian consumers on Indian reservations; (8) a challenge to the constitutionality of Clean Water/Clean Air Bond Act; and (9) a challenge to the Governor's application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1997-98 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short-term notes to the public again until 1979. In 1975, S&P suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications.
Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. As of June 30, 1997, MAC had outstanding an aggregate of approximately $4.267 billion of its bonds. MAC is authorized to issue bonds and notes to refund its outstanding bonds and notes and to fund certain reserves, without limitation as to principal amount, and to finance certain capital commitments to the Transit Authority and the New York City School Construction Authority through the 1997 fiscal year in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The 1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-987 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the General Fund, primarily as a result of the use of
the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million.
Although the City has maintained balanced budgets in each of its last seventeen fiscal years and is projected to achieve balanced operating results for the 1998 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's indebtedness within the forecast level of the constitutional restrictions on the amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected
contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's current financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to undertake only approximately $1.4 billion of seasonal financing. The City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years.
Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary deficits that resulted in the establishment of a Supervisory Board for the City of Troy in 1994. The Supervisory Board's powers were increased in 1995, when Troy MAC was created to help Troy avoid default on certain obligations. The legislation creating Troy MAC prohibits the city of Troy from seeking federal bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities are scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional
$21 million will be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. Twenty-one localities had outstanding indebtedness for deficit financing at the close of their fiscal year ending in 1996.
From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future.
Year 2000 Compliance. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result.
Investment Limitations
Money Market Portfolio and Municipal Money Market Portfolio. Neither the Money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management. In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuouse operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the affected Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one Rating Organization, are rated (at the time of purchase) by two or more
Rating Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such Rating
Organization (as defined in the Prospectus) in its highest rating category
for such securities, (iii) have no short-term rating and are comparable in
priority and security to a class of short-term obligations of the issuer of
such securities that have been rated in accordance with (i) or (ii) above,
or (iv) are Unrated Securities that are determined to be of comparable
quality to such securities. Purchases of First Tier Securities that come
within categories (ii) and (iv) above will be approved or ratified by the
Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market
Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
2. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
3. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
4. Act as an underwriter.
5. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(5) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts;
(7) invest in oil, gas or mineral exploration or development programs;
(8) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(10) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the New York Municipal Money Market Portfolio may not (i) under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax and does not constitute an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, the Portfolio will not purchase the
securities of any issuer if as a result more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer, except that (a) up to 50% of the value of the Portfolio's assets may be invested without regard to this 5% limitation, provided that no more than 25% of the value of the Portfolio's assets are invested in the securities of any one issuer and (b) this 5% limitation does not apply to securities issued or guaranteed by the U.S. Government, or its agencies or instrumentalities. For purposes of this limitation, a security is considered to be issued by the governmental entity (or entities) whose assets and revenues back the security, or, with respect to a private activity bond that is backed only by the assets and revenues of a non-governmental user, by such non-governmental user. In certain circumstances, the guarantor of a guaranteed security may also be considered to be an issuer in connection with such guarantee. This investment policy is not fundamental and may be changed by the Board of Directors without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Arnold M. Reichman, 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 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, Fahnestock
110 Wall Street & Co., Inc. (a registered
New York, NY 10005 broker-dealer); Prior to October
1996, Executive Vice President of
Gruntal & Co., Inc., (a registered
broker-dealer).
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Francis J. McKay, 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer Center
Philadelphia, PA 19111 (biomedical research and medical
care.)
Marvin E. Sternberg, 63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies
and precision coated abrasives);
since 1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart, Inc.) and Mart
PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc. (shopping
centers); and since 1975, Director
and Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
Julian A. Brodsky, 64 Director Director and Vice-Chairman, since
1234 Market Street 1969, Comcast Corporation;
16th Floor (cabletelevision and communications)
Philadelphia, PA 19107-3723 Director, Comcast Cablevision of
Philadelphia (cable television and
communications) and Nextel
(wireless communications).
Donald van Roden, 73 Director and Chairman of Self-employed businessman. From
1200 Old Mill Lane the Board February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Edward J. Roach, 74 President and Treasurer Certified Public Accountant; Vice
Suite 100 Chairman of the Board, Fox Chase
Bellevue Park Cancer Center; Trustee Emeritus,
Corporate Center Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata
Wilmington, DE 19809 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, 59 Secretary Chairman of the law firm of Drinker
Drinker Biddle & Reath LLP Biddle & Reath LLP; Director,
1345 Chestnut Street Rocking Horse Child Care Centers of
Philadelphia, PA 19107-3496 America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors who are not "affiliated persons" (as the term is defined in the 1940 Act) of any investment adviser or sub-adviser of the Fund or the Distributor and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of the Fund and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Pension or Retirement
Aggregate Benefits Accrued as Estimated Annual
Compensation Part of Fund Benefits Upon
Name of Person/ Position from Registrant Expenses Retirement
------------------------ ---------------- --------------------- ----------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the administrator to the Municipal Money Market and New York Municipal Money Market Portfolios and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios (except the New York Municipal Money Market Portfolio) with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Municipal Money Market and Government Obligations Portfolios. The advisory agreement relating to the Government Obligations Money Market Portfolio is dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is dated November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Government Obligations Portfolio, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market
Portfolio
Government Obligations Money
Market Portfolio
New York Municipal Money
Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market $ 201,095 $1,269,553 $ 14,921
Portfolio
Government Obligations Money $1,774,123 $ 647,063 $404,193
Market Portfolio
New York Municipal Money $ 21,831 $ 324,917 $ 0
Market Portfolio
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For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $ 190,687 $1,218,973 $ 17,576
Government Obligations Money Market
Portfolio $1,638,622 $ 671,811 $406,954
New York Municipal Money Market
Portfolio $ 2,709 $ 268,017 $ 0
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Each Portfolio bears all of its own expenses not specifically assumed by
BIMC. General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; and
(f) the cost of investment company literature and other publications provided by
the Fund to its directors and officers. The Beta classes of the Fund pay their
own distribution fees, and may pay a different share than other classes of other
expenses (excluding advisory and custodial fees) if those expenses are actually
incurred in a different amount by the Beta classes or if they receive different
services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in
connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Contracts or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Government Obligations Money Market Portfolio by the shareholders of the Portfolio at a special meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned and the sub-advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. The Advisory Agreement was approved with respect to the New York Municipal Money Market Portfolio by the Portfolio's shareholders at a special meeting of shareholders held November 21, 1991, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the New York Municipal Money Market Portfolio pursuant to an Administration Agreement dated November 5, 1991 and as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (together, the "Administration Agreements"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market and New York Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreements, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market and New York Municipal Money Market Portfolios.
BIMC is obligated to render administrative services to the Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the
terms of a Delegation Agreement, dated July 29, 1998, between BIMC and PFPC, however, BMIC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $ $
New York Municipal Money Market Portfolio
Government Obligations Money Market Portfolio $ $
|
For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $448,548 $0 $0
New York Municipal Money Market Portfolio $ 99,071 $0 $0
|
For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $428,209 $ 0 $0
New York Municipal Money Market Portfolio $ 67,204 $10,146 $0
|
e
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes
disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Beta Classes pursuant to a Transfer Agency Agreement dated November 5, 1991 and supplements dated November 5, 1991 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of each of the Beta Classes, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Beta Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 entered into by the Distributor and the Fund on behalf of each of the Beta Classes, (the
"Distribution Agreement") and separate Plans of Distribution, as amended, for each of the Beta Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Beta Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreements, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans relating to the Beta Classes of the Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios were approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Beta Class under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Beta Class; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the Beta Classes of each of the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio in the aggregate amounts of $_____, $_____, and $_____, respectively. Of those amounts, $_____, $_____, and $____, respectively, was paid to dealers with whom PDI had entered into dealer agreements, and $_____, $______, and $_____, respectively, was retained by PDI.
During the period September 1, 1997, through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the Plans for the Beta Classes of each of the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio in the aggregate amounts of $_____, $_____, and $______, respectively. Of these amounts, $_____, $______, and $_____, was paid to dealers with whom Counsellors had entered into dealer agreements, and $______, $______, and $______, respectively, was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a registered broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need
for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in the light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
Portfolio Security Value --------- -------- ----- |
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of a class in the Portfolio's cash, securities and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is calculated independently of the other classes of the Fund. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. The net asset value per share of each class is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each day, Monday through Friday, when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value
at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing
the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
Total return and yield and may fluctuate daily and do not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings account or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio's generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of each such Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Beta 2 Common Stock, Beta 3 Common Stock and Beta 4 Common Stock constitute the Beta Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law.
Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities shares of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants, and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of ______________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1998 (the "1998 Annual Report") are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by the Fund's independent accountants, [ ]. The reports of [ ] 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. Copies of the 1998 Annual Report may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this Statement of Additional Information.
APPENDIX A
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where default has actually occurred--and not where default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expect that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
GAMMA FAMILY
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of three classes (the "Gamma Shares") representing interests in three investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Gamma Family Prospectus of the Fund dated _____________, 1998, (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ____________, 1998.
CONTENTS
Prospectus
Page Page
---- ----------
General
Investment Objectives and Policies................................
Directors and Officers............................................
Investment Advisory, Distribution and Servicing Arrangements......
Portfolio Transaction ...........................................
Purchase and Redemption Information...............................
Valuation of Shares...............................................
Performance Information...........................................
Taxes.............................................................
Additional Information Concerning Fund Shares.....................
Miscellaneous.....................................................
Appendix A........................................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to three classes of shares (the "Gamma Classes") representing interests in three investment portfolios (the "Portfolios") of the Fund: the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Gamma Classes are offered by the Prospectus dated _____________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Municipal Money Market or New York Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand.
The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Municipal Money Market and New York Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Municipal Money Market or New York Municipal Money Market Portfolios have such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, such Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of such Portfolio's commitment. It may be expected that such Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because such Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, such Portfolio expects that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When any of the Municipal Money Market Portfolio or the New York Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Municipal Money Market Portfolio or New York Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio expects that stand-by commitments will generally
be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities, which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. Any such Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation, which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the
default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those, which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's
adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or
(ii) the daily amortization of the difference between the purchase price and the
repurchase price specified in the repurchase agreement. The Portfolio's adviser
or sub-adviser will mark to market daily the value of the securities. Securities
subject to repurchase agreements will be held by the Fund's custodian in the
Federal Reserve/Treasury book-entry system or by another authorized securities
depository. Repurchase agreements are considered to be loans by a Portfolio
under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Government Obligations Portfolio may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMOs. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when
interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities, (2) securities that
(a) are rated (at the time of purchase) by two or more nationally recognized
statistical rating organizations ("Rating Organizations") in the two highest
rating categories for such securities (e.g., commercial paper rated "A-1" or
"A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at
the time of purchase) by the only Rating Organization rating the security in one
of its two highest rating categories for such securities; (3) short-term
obligations and subject to certain SEC requirements; long-term obligations that
have remaining maturities of 13 months or less, provided in each instance that
such obligations have no short-term rating and are comparable in priority and
security to a class of short-term obligations of the issuer that has been rated
in accordance with (2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have
comparable obligations rated by a Rating Organization ("Unrated Securities"),
provided that such securities are determined to be of comparable quality to a
security satisfying (2) or (3) above; and (5) subject to certain conditions
imposed under SEC rules, obligations guaranteed by persons which meet the
requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on
resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Special Considerations Relating To New York Municipal Obligations. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional
Information. The accuracy and completeness of the information contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies.
The forecast of the State's economy shows continued expansion during the 1998 calendar year, with employment growth gradually slowing as the year progresses. The financial and business service sectors are expected to continue to do well, while employment in the manufacturing and government sectors will post only small, if any, declines. On an average annual basis, the employment growth rate in the State is expected to be higher than in 1997 and the unemployment rate is expected to drop further to 6.1 percent. Personal income is expected to record moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the previous year as the recent robust growth in bonus payments moderates.
There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations
or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998-99 budget process. Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than-projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund spending offsets, and other actions necessary to bring projected disbursements and receipts into balance.
Other actions taken in the 1997-98 adopted budget add further pressure to future budget balance in the State. For example, the fiscal effects of tax reductions adopted in the 1997-98 budget are projected to grow more substantially beyond the 1998-99 fiscal year, with incremental costs averaging in excess of $1.3 billion annually over the last three years of the tax reduction program. These incremental costs reflect the phase-in of State-funded school property tax and local income tax relief, the phase-out of the assessments on medical providers,
and reductions in estate and gift levies, utility gross receipts taxes, and the State sales tax on clothing. The full annual cost of the enacted tax reduction package is estimated at approximately $4.8 billion when fully effective in State fiscal year 2001-02. In addition, the 1997-98 budget included multi-year commitments for school aid and pre-kindergarten early learning programs which could add as much as $1.4 billion in costs when fully annualized in fiscal year 2001-02. These spending commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the 2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998-99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the School Tax Relief Program ("STAR"), expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million avai lable for future needs, a balance of $400 million in the Tax Stabilization Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF is used to finance various legislative and executive initiatives. The CRF provides resource to help finance any extraordinary litigation costs during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1999 to 1998. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $62 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for
correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent.
The economic and financial condition of the State may be affected by various financial, social, economic and political factors. Those factors can be very complex, may vary from fiscal year to fiscal year, and are frequently the result of actions taken not only by the State and its agencies and instrumentalities, but also by entities, such as the federal government, that are not under the control of the State. In addition, the financial plan is based upon forecasts of national and State economic activity. Economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. Actual results, however, could differ materially and adversely from the projections set forth in a financial plan, and those projections may be changed materially and adversely from time to time.
In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the Division of Budget believes it could take similar actions should variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes.
The State ended its 1997-98 fiscal year in balance on a cash basis, with a General Fund cash surplus as reported by DOB of approximately $2.04 billion. The cash surplus was derived primarily from higher-than-anticipated receipts and lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205 million from the prior fiscal year. The balance is held in three accounts within the General Fund: the Tax Stabilization Reserve Fund, the Contingency Reserve Fund and the Community Projects Fund. The TSRF closing balance was $400 million, following a required deposit of $15 million (repaying a transfer made in 1991-92) and an extraordinary deposit of $68 million made from the 1997-98 surplus. The CRF closing balance was $68 million, following a $27 million deposit from the surplus. The CPF, which finances legislative initiatives, closed the fiscal year with a balance of $170 million, an increase of $95 million. The General Fund closing balance did not include $2.39 billion in the tax refund reserve account, of which $521 million was made available as a result of the Local Government Assistance Corporation ("LGAC") financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year (including net tax refund reserve account activity) totaled $34.55 billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97. General Fund disbursements and transfers to other funds were $34.35 billion, an annual increase of $1.45 billion or 4.41 percent.
Debt Limits and Outstanding Debt. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general obligation borrowing (i.e., borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State.
The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms, lease-purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual-obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. The State does not anticipate that it will be called upon to make any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("S&P") reduced its ratings on the State's general obligation bonds from A to Aand, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, S&P revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget, will be released on or before July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year.
The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated that approximately $191 million will be issued to finance agency equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems.
Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was released with the 1998-99 Executive Budget on January 20, 1998. As a part of that Plan, changes were proposed to the State's 1997-98 borrowing plan, including: the delay in the issuance of COPs to finance welfare information systems until 1998-99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to maintain proper housing; (4) alleged responsibility of New York State officials to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates; (6) challenges to the constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non-Indian consumers on Indian reservations; (8) a challenge to the constitutionality of Clean Water/Clean Air Bond Act; and (9) a challenge to the Governor's application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1997-98 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short-term notes to the public again until 1979. In 1975, S&P suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications.
Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. As of June 30, 1997, MAC had outstanding an aggregate of approximately $4.267 billion of its bonds. MAC is authorized to issue bonds and notes to refund its outstanding bonds and notes and to fund certain reserves, without limitation as to principal amount, and to finance certain capital commitments to the Transit Authority and the New York City School Construction Authority through the 1997 fiscal year in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The 1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-987 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the General Fund, primarily as a result of the use of the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million.
Although the City has maintained balanced budgets in each of its last seventeen fiscal years and is projected to achieve balanced operating results for the 1998 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's indebtedness within the forecast level of the constitutional restrictions on the amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's current financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to undertake only approximately $1.4 billion of seasonal financing. The
City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years.
Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary deficits that resulted in the establishment of a Supervisory Board for the City of Troy in 1994. The Supervisory Board's powers were increased in 1995, when Troy MAC was created to help Troy avoid default on certain obligations. The legislation creating Troy MAC prohibits the city of Troy from seeking federal bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities are scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional $21 million will be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those
local government units othe r than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. Twenty-one localities had outstanding indebtedness for deficit financing at the close of their fiscal year ending in 1996.
From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future.
Year 2000 Compliance. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result.
Investment Limitations
Municipal Money Market Portfolio. The Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the Portfolio's total assets at the time of such borrowing;
or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of the Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
The foregoing investment limitations cannot be changed without shareholder approval.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Act as an underwriter.
4. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(5) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts;
(7) invest in oil, gas or mineral exploration or development programs;
(8) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(10) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the New York Municipal Money Market Portfolio may not (i) under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax and does not constitute an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, the Portfolio will not purchase the securities of any issuer if as a result more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer, except that (a) up to 50% of the value of the Portfolio's assets may be invested without regard to this 5% limitation, provided that no more than 25% of the value of the Portfolio's assets are invested in the securities of any one issuer and (b) this 5% limitation does not apply to securities issued or guaranteed by the U.S. Government, or its agencies or instrumentalities. For purposes of this limitation, a security is considered to be issued by the governmental entity (or entities) whose assets and revenues back the security, or, with respect to a private activity bond that is backed only by the assets and revenues of a non-governmental user, by such non-governmental user. In certain circumstances, the guarantor of a guaranteed security may also be considered to be an issuer in connection with such guarantee. This investment policy is not fundamental and may be changed by the Board of Directors without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Arnold M. Reichman, 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 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, Fahnestock
110 Wall Street & Co., Inc. (a registered
New York, NY 10005 broker-dealer); Prior to October
1996, Vice President of
Gruntal & Co. (a
registered broker-dealer).
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Francis J. McKay, 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer Center
Philadelphia, PA 19111 (biomedical research and medical
care.)
Marvin E. Sternberg, 63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies
and precision coated abrasives);
since 1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart, Inc.) and Mart
PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc. (shopping
centers); and since 1975, Director
and Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
Julian A. Brodsky, 64 Director Director and Vice-Chairman, since
1234 Market Street 1969, Comcast Corporation;
16th Floor (cabletelevision and
Philadelphia, PA 19107-3723 communications) Director, Comcast
Cablevision of Philadelphia
(cable television communications) and
Nextel (wireless communications).
Donald van Roden, 73 Director and Chairman of Self-employed businessman. From
1200 Old Mill Lane the Board February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic service);
Director, Keystone Insurance Co.
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Edward J. Roach, 74 President and Treasurer Certified Public Accountant; Vice
Suite 100 Chairman of the Board, Fox Chase
Bellevue Park Cancer Center; Trustee Emeritus,
Corporate Center Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata
Wilmington, DE 19809 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, 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse Child Care
Philadelphia, PA 19107-3496 Centers of America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board all persons to be nominated as directors of the Fund.
The Fund pays directors $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
Pension or Retirement
Aggregate Benefits Accrued as Estimated Annual
Compensation Part of Fund Benefits Upon
Name of Person/ Position from Registrant Expenses Retirement
------------------------------ ---------------- ------------- ----------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the administrator to the Municipal Money Market and New York Municipal Money Market Portfolios and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios (except the New York Municipal Money Market Portfolio) with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive an annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Municipal Money Market and Government Obligations Portfolios. The advisory agreement relating to the Government Obligations Money Market Portfolio is dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is dated November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Government Obligations Portfolio, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market
Portfolio
Government Obligations Money
Market Portfolio
New York Municipal Money
Market Portfolio
|
For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market $ 201,095 $1,269,553 $ 14,921
Portfolio
Government Obligations Money $1,774,123 $ 647,063 $404,193
Market Portfolio
New York Municipal Money $ 21,831 $ 324,917 $ 0
Market Portfolio
|
For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $ 190,687 $1,218,973 $ 17,576
Government Obligations Money Market
Portfolio $1,638,622 $ 671,811 $406,954
New York Municipal Money Market
Portfolio $ 2,709 $ 268,017 $ 0
|
Each Portfolio bears all of its own expenses not specifically assumed by
BIMC. General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; and
(f) the cost of investment company literature and other publications provided by
the Fund to its directors and officers. The Gamma classes of the Fund pay their
own distribution fees, and may pay a different share than other classes of other
expenses (excluding advisory and custodial fees) if those expenses are actually
incurred in a different amount by the Gamma classes or if they receive different
services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Contracts or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Government Obligations Money Market Portfolio by the shareholders of the Portfolio at a special meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992,
as adjourned and the sub-advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. The Advisory Agreement was approved with respect to the New York Municipal Money Market Portfolio by the Portfolio's shareholders at a special meeting of shareholders held November 21, 1991, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the New York Municipal Money Market Portfolio pursuant to an Administration Agreement dated November 5, 1991 and as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (together, the "Administration Agreements"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market and New York Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreements, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market and New York Municipal Money Market Portfolios.
BIMC is obligated to render administrative services to the Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of a Delegation Agreement, dated July 29, 1998, between BIMC and PFPC, however, BMIC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market
Portfolio $ $
New York Municipal Money
Market Portfolio
Government Obligations Money
Market Portfolio $ $
|
For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $448,548 $0 $0
New York Municipal Money Market
Portfolio $ 99,071 $0 $0
|
For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $428,209 $ 0 $0
New York Municipal Money Market
Portfolio $ 67,204 $10,146 $0
|
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC
Bank (a) maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Gamma Classes pursuant to a Transfer Agency Agreement dated November 5, 1991 and supplements dated November 5, 1991 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of each of the Gamma Classes, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Gamma Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 entered into by the Distributor and the Fund on behalf of each of the Gamma Classes, (the "Distribution Agreement") and separate Plans of Distribution, as amended, for each of the Gamma Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Gamma Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreements, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans relating to the Gamma Classes of the Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios were approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Gamma Class under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Gamma Class; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a registered broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in the light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or
sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday
closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of a class in the Portfolio's cash, securities and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is calculated independently of the other classes of the Fund. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. The net asset value per share of each class is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each day, Monday through Friday, when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available
market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
Total return and yield and may fluctuate daily and do not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings account or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one
money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio's generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of each such Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100
million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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), 100 million shares are classified as Class W Common Stock, 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 (n/i Numeric Investors Growth & Value), 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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Gamma 2 Common Stock, Gamma 3 Common Stock and Gamma 4 Common Stock constitute the Gamma Classes, described herein. Under RBB's charter, the Board of
Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interest in the Money Market, Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities shares of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants, and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. ( ), serves as the Fund's independent accountants.
Control Persons. As of ______________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co.
Supplemental Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
BEA SELECT ECONOMIC VALUE Patterson & Co. 90.54%
EQUITY - INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
BEA STRATEGIC GLOBAL FIXED Sunkist Master Trust 53.09%
INCOME FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
BEA INT'L EQUITY - ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
BEA GLOBAL TELE-COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
- ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
BEA HIGH YIELD - ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, MO 63303
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
State Street Bank and Trust Company 8.675%
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
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Bank of America NT & SA 17.438%
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
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 29302
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND - INSTITUTIONAL SHARES Boston, MA 02108
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
-------------------------------------------------------------------------------------------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND - INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
-------------------------------------------------------------------------------------------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from
purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where default has actually occurred--and not where default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expect that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be
made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
DELTA FAMILY
Money Market Portfolio,
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of four classes (the "Delta Shares") representing interests in four investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Delta Family Prospectus of the Fund dated _____________, 1998, (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ____________, 1998.
CONTENTS
Prospectus
Page Page
General
Investment Objectives and Policies.............................................
Directors and Officers.........................................................
Investment Advisory, Distribution and Servicing Arrangements...................
Portfolio Transaction ........................................................
Purchase and Redemption Information............................................
Valuation of Shares............................................................
Performance Information........................................................
Taxes ......................................................................
Additional Information Concerning Fund Shares..................................
Miscellaneous..................................................................
Appendix A.....................................................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to four classes of shares (the "Delta Classes") representing interests in four investment portfolios (the "Portfolios") of the Fund: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Delta Classes are offered by the Prospectus dated _____________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
ADDITIONAL INFORMATION ON PORTFOLIO INVESTMENTS.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market Portfolio or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market, Municipal Money Market or New York Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market, Municipal Money Market and New York Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market, Municipal Money Market or New York Municipal Money Market Portfolios have such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, such Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of such Portfolio's commitment. It may be expected that such Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because such Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, such Portfolio expects that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When any of the Money Market Portfolio, Municipal Money Market Portfolio or the New York Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio, Municipal Money Market Portfolio or New York Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher
price for portfolio securities, which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. Any such Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation, which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those, which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is issued in reliance on the "private placement" exemption from registration which is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section 4(2) paper is restricted as to disposition under the federal securities laws and is generally sold to institutional investors such as the Fund which agree that they are purchasing the paper for investment and not with a view to public distribution. Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper normally is resold to other institutional investors through or with the assistance of investment dealers who make a market in the Section 4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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
Portfolio's adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark to market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market and Government Obligations Portfolios may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through
securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMOs. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible securities" that present minimal credit risks as determined by the investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include (1) U.S. Government securities, (2) securities that (a) are rated (at the time of purchase) by two or more nationally recognized statistical rating organizations ("Rating Organizations") in the two highest rating categories for such securities (e.g., commercial paper rated "A-1" or "A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at the time of purchase) by the only Rating Organization rating the security in one of its two highest rating categories for such securities; (3) short-term obligations and subject to certain SEC requirements; long-term obligations that have remaining maturities of 13 months or less, provided in each instance that such obligations have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer that has been rated in accordance with (2)(a) or (b) above ("comparable obligations"); (4) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to a security satisfying (2) or (3) above; and (5) subject to certain conditions imposed under SEC rules, obligations guaranteed by persons which meet the requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Special Considerations Relating To New York Municipal Obligations. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional Information. The accuracy and completeness of the information contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location
and its excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies.
The forecast of the State's economy shows continued expansion during the 1998 calendar year, with employment growth gradually slowing as the year progresses. The financial and business service sectors are expected to continue to do well, while employment in the manufacturing and government sectors will post only small, if any, declines. On an average annual basis, the employment growth rate in the State is expected to be higher than in 1997 and the unemployment rate is expected to drop further to 6.1 percent. Personal income is expected to record moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the previous year as the recent robust growth in bonus payments moderates.
There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998-99 budget process. Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than-projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund spending offsets, and other actions necessary to bring projected disbursements and receipts into balance.
Other actions taken in the 1997-98 adopted budget add further pressure to future budget balance in the State. For example, the fiscal effects of tax reductions adopted in the 1997-98 budget are projected to grow more substantially beyond the 1998-99 fiscal year, with incremental costs averaging in excess of $1.3 billion annually over the last three years of the tax reduction program. These incremental costs reflect the phase-in of State-funded school property tax and local income tax relief, the phase-out of the assessments on medical providers, and reductions in estate and gift levies, utility gross receipts taxes, and the State sales tax on clothing. The full annual cost of the enacted tax reduction package is estimated at approximately $4.8 billion when fully effective in State fiscal year 2001-02. In addition, the 1997-98 budget included multi-year commitments for school aid and pre-kindergarten early learning programs which could add as much as $1.4 billion in costs when fully annualized in fiscal year 2001-02. These spending commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the 2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998-99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the School Tax Relief Program ("STAR"), expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million available for future needs, a balance of $400 million in the Tax Stabilization Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF is used to finance various legislative and executive initiatives. The CRF provides resource to help finance any extraordinary litigation costs during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1998 to 1999. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $62 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent.
The economic and financial condition of the State may be affected by various financial, social, economic and political factors. Those factors can be very complex, may vary from fiscal year to fiscal year, and are frequently the result of actions taken not only by the State and its agencies and instrumentalities, but also by entities, such as the federal government, that are not under the control of the State. In addition, the financial plan is based upon forecasts of national and State economic activity. Economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. Actual results, however, could differ materially and adversely from the projections set forth in a financial plan, and those projections may be changed materially and adversely from time to time.
In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the Division of Budget believes it could take similar actions should variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes.
The State ended its 1997-98 fiscal year in balance on a cash basis, with a General Fund cash surplus as reported by DOB of approximately $2.04 billion. The cash surplus was derived primarily from higher-than-anticipated receipts and lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205 million from the prior fiscal year. The balance is held in three accounts within the General Fund: the Tax Stabilization Reserve Fund, the Contingency Reserve Fund and the Community Projects Fund. The TSRF closing balance was $400 million, following a required deposit of $15 million (repaying a transfer made in 1991-92) and an extraordinary deposit of $68 million made from the 1997-98 surplus. The CRF closing balance was $68 million, following a $27 million deposit from the surplus. The CPF, which finances legislative initiatives, closed the fiscal year with a balance of $170 million, an increase of $95 million. The General Fund closing balance did not include $2.39 billion in the tax refund reserve account, of which $521 million was made available as a result of the Local Government Assistance Corporation ("LGAC") financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year (including net tax refund reserve account activity) totaled $34.55 billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97. General Fund disbursements and transfers to other funds were $34.35 billion, an annual increase of $1.45 billion or 4.41 percent.
Debt Limits and Outstanding Debt. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general obligation borrowing (i.e., borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State.
The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms, lease-purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual-obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. The State does not anticipate that it will be called upon to make any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("S&P") reduced its ratings on the State's general obligation bonds from A to A- and, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, S&P revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget, will be released on or before July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year.
The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated that approximately $191 million will be issued to finance agency equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems.
Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was released with the 1998-99 Executive Budget on January 20, 1998. As a part of that Plan, changes were proposed to the State's 1997-98 borrowing plan, including: the delay in the issuance of COPs to finance welfare information systems until 1998-99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to maintain proper housing; (4) alleged responsibility of New York State officials
to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates; (6) challenges to the constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non-Indian consumers on Indian reservations; (8) a challenge to the constitutionality of Clean Water/Clean Air Bond Act; and (9) a challenge to the Governor's application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1997-98 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short-term notes to the public again until 1979. In 1975, S&P suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications.
Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. As of June 30, 1997, MAC had outstanding an aggregate of approximately $4.267 billion of its bonds. MAC is authorized to issue bonds and notes to refund its outstanding bonds and notes and to fund certain reserves, without limitation as to principal amount, and to finance certain capital commitments to the Transit Authority and the New York City School Construction Authority through the 1997 fiscal year in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The 1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-987 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the General Fund, primarily as a result of the use of the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million.
Although the City has maintained balanced budgets in each of its last seventeen fiscal years and is projected to achieve balanced operating results for the 1998 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's indebtedness within the forecast level of the constitutional restrictions on the
amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's current financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to undertake only approximately $1.4 billion of seasonal financing. The City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years.
Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary deficits that resulted in the establishment of a Supervisory Board for the City of Troy in 1994. The Supervisory Board's powers were increased in 1995, when Troy MAC was created to help Troy avoid default on certain obligations. The legislation creating Troy MAC prohibits the city of Troy from seeking federal bankruptcy protection while Troy MAC bonds are outstanding.Troy MAC has issued bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities are scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional $21 million will be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. Twenty-one localities had outstanding indebtedness for deficit financing at the close of their fiscal year ending in 1996.
From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future.
Year 2000 Compliance. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result.
Investment Limitations
Money Market Portfolio and Municipal Money Market Portfolio. Neither the money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4 underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or
combinations thereof;
(6) purchase or sell real estate, provided that a
Portfolio may invest in securities secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein;
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(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the affected Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its
purchases of the securities of any one issuer, other than issuers of U.S.
Government securities, to 5% of its total assets, except that the Money
Market Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one Rating Organization, are rated (at the time of purchase) by two or more
Rating Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such Rating
Organization (as defined in the Prospectus) in its highest rating category
for such securities, (iii) have no short-term rating and are comparable in
priority and security to a class of short-term obligations of the issuer of
such securities that have been rated in accordance with (i) or (ii) above,
or (iv) are Unrated Securities that are determined to be of comparable
quality to such securities. Purchases of First Tier Securities that come
within categories (ii) and (iv) above will be approved or ratified by the
Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
2. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
3. Act as an underwriter.
4. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(5) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(6)purchase or sell commodities or commodity contracts;
(7)invest in oil, gas or mineral exploration or development programs;
(8) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(10) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the New York Municipal Money Market Portfolio may not (i) under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax and does not constitute an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, the Portfolio will not purchase the securities of any issuer if as a result more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer, except that (a) up to 50% of the value of the Portfolio's assets may be invested without regard to this 5% limitation, provided that no more than 25% of the value of the Portfolio's assets are invested in the securities of any one issuer and (b) this 5% limitation does not apply to securities issued or guaranteed by the U.S. Government, or its agencies or instrumentalities. For purposes of this limitation, a security is considered to be issued by the governmental entity (or entities) whose assets and revenues back the security, or, with respect to a private activity bond that is backed only by the assets and revenues of a non-governmental user, by such non-governmental user. In certain circumstances, the guarantor of a guaranteed security may also be considered to be an issuer in connection with such guarantee. This investment policy is not fundamental and may be changed by the Board of Directors without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Arnold M. Reichman, 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 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, Fahnestock
110 Wall Street & Co., Inc. (a registered
New York, NY 10005 broker-dealer); Prior to October
1996, Executive Vice President
of Gruntal & Co., Inc., (a
registered broker-dealer).
33
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Francis J. McKay, 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer Center
Philadelphia, PA 19111 (biomedical research and medical
care).
Marvin E. Sternberg, 63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies
and precision coated abrasives);
since 1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart, Inc.) and Mart
PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc. (shopping
centers); and since 1975, Director
and Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
Julian A. Brodsky, 64 Director Director and Vice-Chairman, Since
1234 Market Street 1969, Comcast Corporation;
16th Floor (cabletelevision and
Philadelphia, PA 19107-3723 communications) Director, Comcast
Cablevision of Philadelphia
(cable television and
communications) and Nextel
(wireless communications).
Donald van Roden, 73 Director Self-employed businessman. From
1200 Old Mill Lane and Chairman of the Board February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic
(auto service); Director,
Keystone Insurance Co.
34
|
Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Edward J. Roach, 74 President and Treasurer Certified Public Accountant; Vice
Suite 100 Chairman of the Board, Fox Chase
Bellevue Park Cancer Center; Trustee Emeritus,
Corporate Center Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata
Wilmington, DE 19809 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, 59 Secretary Chairman of the law firm of Drinker
LLP Drinker Biddle & Reath LLP; Biddle & Reath LLP; Rocking Horse Care
1345 Chestnut Street Director, Centers of America, Inc.
Philadelphia, PA 19107-3496
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board annually all persons to be nominated as directors of the Fund.
The Fund pays directors $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
-----------------------
Pension or Retirement
Aggregate Benefits Accrued as Estimated Annual
Compensation Part of Fund Benefits Upon
Name of Person/ Position from Registrant Expenses Retirement
------------------------------ ---------------- --------------------- ---------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the administrator to the Municipal Money Market and New York Municipal Money Market Portfolios and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios (except the New York Municipal Money Market Portfolio) with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market, Municipal Money Market and Government Obligations Portfolios. The advisory agreements relating to the Money Market and Government Obligations Money Market Portfolios are each dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is dated November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market and Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio
Municipal Money Market
Portfolio
Government Obligations Money
Market Portfolio
New York Municipal Money
Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
Municipal Money Market $ 201,095 $1,269,553 $ 14,921
Portfolio
Government Obligations Money $1,774,123 $ 647,063 $404,193
Market Portfolio
New York Municipal Money $ 21,831 $ 324,917 $ 0
Market Portfolio
|
For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
Portfolios waivers and reimbursements) Waivers Reimbursements
---------- --------------------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money Market Portfolio $ 190,687 $1,218,973 $ 17,576
Government Obligations Money Market
Portfolio $1,638,622 $ 671,811 $406,954
New York Municipal Money Market
Portfolio $ 2,709 $ 268,017 $ 0
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Each Portfolio bears all of its own expenses not specifically assumed by BIMC. General expenses of the Fund not readily identifiable as belonging to a portfolio of the Fund are allocated among all investment portfolios by or under the direction of the Fund's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against the Fund or a portfolio for violation of any law; (d) any extraordinary expenses; (e) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; and (f) the cost of investment company literature and other publications provided by the Fund to its directors and officers. The Delta classes of the Fund pay their own distribution fees, and may pay a different share than other classes of other expenses (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by the Delta classes or if they receive different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Money Market and Government Obligations Money Market Portfolios by the shareholders of each Portfolio at a special meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned and the sub-advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. The Advisory Agreement was approved with respect to the New York Municipal Money Market Portfolio by the Portfolio's shareholders at a special meeting of shareholders held November 21, 1991, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the New York Municipal Money Market Portfolio pursuant to an Administration Agreement dated November 5, 1991 and as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (together, the "Administration Agreements"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market and New York Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreements, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market and New York Municipal Money Market Portfolios.
BIMC is obligated to render administrative services to the Money Market and Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of Delegation Agreements, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $0 $0
New York Municipal Money Market Portfolio
Money Market Portfolio $0 $0
Government Obligations Money Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $448,548 $0 $0
New York Municipal Money Market Portfolio $ 99,071 $0 $0
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For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $428,209 $ 0 $0
New York Municipal Money Market Portfolio $ 67,204 $10,146 $0
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Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Delta Classes pursuant to a Transfer Agency Agreement dated November 5, 1991 and supplements dated November 5, 1991 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of each of the Delta Classes, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Delta Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 entered into by the Distributor and the Fund on behalf of each of the Delta Classes, (the "Distribution Agreement") and separate Plans of Distribution, as amended, for each of the Delta Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Delta Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans relating to the Delta Classes of the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios were approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Delta Class under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Delta Class; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a registered broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
Portfolio Security Value
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of a class in the Portfolio's cash, securities and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is calculated independently of the other classes of the Fund. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. The net asset value per share of each class is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business
Day" means each day, Monday through Friday, when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had
the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
Total return and yield may fluctuate daily and do not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that
monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of each such Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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), 100 million shares are classified as Class W Common Stock, 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 (n/i Numeric Investors Growth & Value), 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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Delta 1 Common Stock, Delta 2 Common Stock, Delta 3 Common Stock and Delta 4 Common Stock constitute the Delta Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities shares of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants, and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of ______________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co.
Supplemental Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
51
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------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
52
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------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
53
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------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
54
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------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE-COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
- ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
55
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------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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
------------------------------------ ------------------------------------------------ -------------------------------
56
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55
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------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Public Inst. For Social Security 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
57
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55
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------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930 2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
58
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55
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------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
59
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55
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------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
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Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
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60
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
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BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND - INSTITUTIONAL Boston, MA 02108
SHARES
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Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
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Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
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David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
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BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND - INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
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Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
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SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
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SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
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Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
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As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where default has actually occurred--and not where default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expect that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. Examples include: obligations linked or indexed to equities, currencies, or commodities; obligations exposed to severe prepayment risk--such as interest-only or principal-only mortgage securities and obligations with unusually risky interest terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"CCC", "CC", and "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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
EPSILON FAMILY
Money Market Portfolio,
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of four classes (the "Epsilon Shares") representing interests in four investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Epsilon Family Prospectus of the Fund dated _____________, 1998, (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ____________, 1998.
CONTENTS
Prospectus
Page Page
---- ----
General............................................................
Investment Objectives and Policies.................................
Directors and Officers.............................................
Investment Advisory, Distribution and Servicing Arrangements.......
Portfolio Transaction ............................................
Purchase and Redemption Information................................
Valuation of Shares................................................
Performance Information............................................
Taxes ............................................................
Additional Information Concerning Fund Shares......................
Miscellaneous......................................................
Appendix A.........................................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to four classes of shares (the "Epsilon Classes") representing interests in four investment portfolios (the "Portfolios") of the Fund: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Epsilon Classes are offered by the Prospectus dated _____________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market Portfolio or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market, Municipal Money Market or New York Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. The absence of an active secondary
market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market, Municipal Money Market and New York Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market, Municipal Money Market or New York Municipal Money Market Portfolios have such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, such Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of such Portfolio's commitment. It may be expected that such Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because such Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, such Portfolio expects that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When any of the Money Market Portfolio, Municipal Money Market Portfolio or the New York Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio, Municipal Money Market Portfolio or New York Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for
portfolio securities, which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. Any such Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation, which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those, which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's adviser or
sub-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 either (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark to market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market and Government Obligations Portfolios may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the
CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMOs. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market
Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities, (2) securities that
(a) are rated (at the time of purchase) by two or more nationally recognized
statistical rating organizations ("Rating Organizations") in the two highest
rating categories for such securities (e.g., commercial paper rated "A-1" or
"A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at
the time of purchase) by the only Rating Organization rating the security in one
of its two highest rating categories for such securities; (3) short-term
obligations and subject to certain SEC requirements; long-term obligations that
have remaining maturities of 13 months or less, provided in each instance that
such obligations have no short-term rating and are comparable in priority and
security to a class of short-term obligations of the issuer that has been rated
in accordance with (2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have
comparable obligations rated by a Rating Organization ("Unrated Securities"),
provided that such securities are determined to be of comparable quality to a
security satisfying (2) or (3) above; and (5) subject to certain conditions
imposed under SEC rules, obligations guaranteed by persons which meet the
requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Special Considerations Relating To New York Municipal Obligations. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional Information. The accuracy and completeness of the information contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part
of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies.
The forecast of the State's economy shows continued expansion during the 1998 calendar year, with employment growth gradually slowing as the year progresses. The financial and business service sectors are expected to continue to do well, while employment in the manufacturing and government sectors will post only small, if any, declines. On an average annual basis, the employment growth rate in the State is expected to be higher than in 1997 and the unemployment rate is expected to drop further to 6.1 percent. Personal income is expected to record moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the previous year as the recent robust growth in bonus payments moderates.
There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998-99 budget process. Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than-projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund spending offsets, and other actions necessary to bring projected disbursements and receipts into balance.
Other actions taken in the 1997-98 adopted budget add further pressure to future budget balance in the State. For example, the fiscal effects of tax reductions adopted in the 1997-98 budget are projected to grow more substantially beyond the 1998-99 fiscal year, with incremental costs averaging in excess of $1.3 billion annually over the last three years of the tax reduction program. These incremental costs reflect the phase-in of State-funded school property tax and local income tax relief, the phase-out of the assessments on medical providers, and reductions in estate and gift levies, utility gross receipts taxes, and the State sales tax on clothing. The full annual cost of the enacted tax reduction package is estimated at approximately $4.8 billion when fully effective in State fiscal year 2001-02. In addition, the 1997-98 budget included multi-year commitments for school aid and pre-kindergarten early learning programs which could add as much as $1.4 billion in costs when fully annualized in fiscal year 2001-02. These spending commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap
in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the 2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998-99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the School Tax Relief Program ("STAR"), expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million available for future needs, a balance of $400 million in the Tax Stabilization Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF is used to finance various legislative and executive initiatives. The CRF
provides resource to help finance any extraordinary litigation costs during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1999 to 1998. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $62 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent.
The economic and financial condition of the State may be affected by various financial, social, economic and political factors. Those factors can be very complex, may vary from fiscal year to fiscal year, and are frequently the result of actions taken not only by the State and its agencies and instrumentalities, but also by entities, such as the federal government, that are not under the control of the State. In addition, the financial plan is based upon forecasts of national and State economic activity. Economic forecasts have
frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. Actual results, however, could differ materially and adversely from the projections set forth in a financial plan, and those projections may be changed materially and adversely from time to time.
In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the Division of Budget believes it could take similar actions should variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes.
The State ended its 1997-98 fiscal year in balance on a cash basis, with a General Fund cash surplus as reported by DOB of approximately $2.04 billion. The cash surplus was derived primarily from higher-than-anticipated receipts and lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205 million from the prior fiscal year. The balance is held in three accounts within the General Fund: the Tax Stabilization Reserve Fund, the Contingency Reserve Fund and the Community Projects Fund. The TSRF closing balance was $400 million, following a required deposit of $15 million (repaying a transfer made in 1991-92) and an extraordinary deposit of $68 million made from the 1997-98 surplus. The CRF closing balance was $68 million, following a $27 million deposit from the surplus. The CPF, which finances legislative initiatives, closed the fiscal year with a balance of $170 million, an increase of $95 million. The General Fund closing balance did not include $2.39 billion in the tax refund reserve account, of which $521 million was made available as a result of the Local Government Assistance Corporation ("LGAC") financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year (including net tax refund reserve account activity) totaled $34.55 billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97. General Fund disbursements and transfers to other funds were $34.35 billion, an annual increase of $1.45 billion or 4.41 percent.
Debt Limits and Outstanding Debt. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general
obligation borrowing (i.e., borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State.
The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms, lease-purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual-obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. The State does not anticipate that it will be called upon to make any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("S&P") reduced its ratings on the State's general obligation bonds from A to A- and, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, S&P revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget, will be released on or before July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year.
The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated
that approximately $191 million will be issued to finance agency equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems.
Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was released with the 1998-99 Executive Budget on January 20, 1998. As a part of that Plan, changes were proposed to the State's 1997-98 borrowing plan, including: the delay in the issuance of COPs to finance welfare information systems until 1998-99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to maintain proper housing; (4) alleged responsibility of New York State officials to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates; (6) challenges to the
constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non-Indian consumers on Indian reservations; (8) a challenge to the constitutionality of Clean Water/Clean Air Bond Act; and (9) a challenge to the Governor's application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1997-98 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short-term notes to the public again until 1979. In 1975, S&P suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications.
Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. As of June 30, 1997, MAC had outstanding an aggregate of approximately $4.267 billion of its bonds. MAC is authorized to issue bonds and notes to refund its outstanding bonds and notes and to fund certain reserves, without limitation as to principal amount, and to finance certain capital commitments to the Transit Authority and the New York City School Construction Authority through the 1997 fiscal year in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The 1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-987 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and
administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the
General Fund, primarily as a result of the use of the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million.
Although the City has maintained balanced budgets in each of its last seventeen fiscal years and is projected to achieve balanced operating results for the 1998 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's indebtedness within the forecast level of the constitutional restrictions on the amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected
contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's current financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to undertake only approximately $1.4 billion of seasonal financing. The City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years.
Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary deficits that resulted in the establishment of a Supervisory Board for the City of Troy in 1994. The Supervisory Board's powers were increased in 1995, when Troy MAC was created to help Troy avoid default on certain obligations. The legislation creating Troy MAC prohibits the city of Troy from seeking federal bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities are scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional $21 million will
be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. Twenty-one localities had outstanding indebtedness for deficit financing at the close of their fiscal year ending in 1996.
From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future.
Year 2000 Compliance. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result.
Investment Limitations
Money Market Portfolio and Municipal Money Market Portfolio. Neither the Money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the affected Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one Rating Organization, are rated (at the time of purchase) by two or more
Rating Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such Rating
Organization (as defined in the Prospectus) in its highest rating category
for such securities, (iii) have no short-term rating and are comparable in
priority and security to a class of short-term obligations of the issuer of
such securities that have been rated in accordance with (i) or (ii) above,
or (iv) are Unrated Securities that are determined to be of comparable
quality to such securities. Purchases of First Tier Securities that come
within categories (ii) and (iv) above will be approved or ratified by the
Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
2. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
3. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
4. Act as an underwriter.
5. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(5) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts;
(7) invest in oil, gas or mineral exploration or development programs;
(8) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(10) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the New York Municipal Money Market Portfolio may not (i) under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax and does not constitute an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, the Portfolio will not purchase the securities
of any issuer if as a result more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer, except that (a) up to 50% of the value of the Portfolio's assets may be invested without regard to this 5% limitation, provided that no more than 25% of the value of the Portfolio's assets are invested in the securities of any one issuer and (b) this 5% limitation does not apply to securities issued or guaranteed by the U.S. Government, or its agencies or instrumentalities. For purposes of this limitation, a security is considered to be issued by the governmental entity (or entities) whose assets and revenues back the security, or, with respect to a private activity bond that is backed only by the assets and revenues of a non-governmental user, by such non-governmental user. In certain circumstances, the guarantor of a guaranteed security may also be considered to be an issuer in connection with such guarantee. This investment policy is not fundamental and may be changed by the Board of Directors without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Arnold M. Reichman, 50* 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, 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer
Philadelphia, PA 19111 Center (biomedical research
and medical care.)
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Marvin E. Sternberg, 63 Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc.
(manufacturer of dental
supplies and precision coated
abrasives); since 1968,
Director and President, Mart
MMM, Inc. (formerly
Montgomeryville
Merchandise Mart, Inc.) and
Mart PMM, Inc. (formerly
Pennsauken Merchandise
Mart, Inc. (shopping
centers); and since 1975,
Director and Executive Vice
President, Cellucap Mfg.
Co., Inc. (manufacturer of
disposable headwear).
Julian A. Brodsky, 64 Director Director and Vice-Chairman,
1234 Market Street Since 1969, Comcast
16th Floor Corporation; (cabletelevision
Philadelphia, PA 19107-3723 and communications)
Director, Comcast Cablevision of
Philadelphia (cable television
and communications) and Nextel
(wireless communications).
Donald van Roden, 73 Director and Chairman of Self-employed businessman.
1200 Old Mill Lane the Board From February 1980 to
Wyomissing, PA 19610 March 1987, Vice Chairman,
SmithKline Beecham Corporation
(pharmaceuticals); Director, AAA
Mid-Atlantic (auto service);
Director, Keystone Insurance Co.
Edward J. Roach, 74 President and Treasurer Certified Public Accountant;
Suite 100 Vice Chairman of the Board,
Bellevue Park Fox Chase Cancer Center;
Corporate Center Trustee Emeritus,
400 Bellevue Parkway Pennsylvania School for the
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
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, 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath
1345 Chestnut Street LLP; Director, Rocking
Philadelphia, PA 19107-3496 Horse Child Care Centers of
America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board annually all persons to be nominated as directors of the Fund.
The Fund pays directors $12,000 annually and $1,250 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 fee of
$6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual
Compensation as Part of Fund Benefits Upon
Name of Person/ Position from Registrant Expenses Retirement
------------------------ ---------------- -------- ----------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
|
On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the administrator to the Municipal Money Market and New York Municipal Money Market Portfolios and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios (except the New York Municipal Money Market Portfolio) with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market, Municipal Money Market and Government Obligations Portfolios. The advisory agreements relating to the Money Market and Government Obligations Money Market Portfolios are each dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is dated November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market and Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio
Municipal Money Market
Portfolio
Government Obligations
Money Market Portfolio
New York Municipal Money
Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
Municipal Money $ 201,095 $1,269,553 $ 14,921
Market Portfolio
Government Obligations $1,774,123 $ 647,063 $404,193
Money Market Portfolio
New York Municipal $ 21,831 $ 324,917 $ 0
Money Market Portfolio
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For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money Market $ 190,687 $1,218,973 $ 17,576
Portfolio
Government Obligations
Money Market Portfolio $1,638,622 $ 671,811 $406,954
New York Municipal Money
Market Portfolio $ 2,709 $ 268,017 $ 0
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Each Portfolio bears all of its own expenses not specifically assumed by
BIMC. General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; and
(f) the cost of investment company literature and other publications provided by
the Fund to its directors and officers. The Epsilon classes of the Fund pay their own distribution fees, and may pay a different share than other classes of other expenses (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by the Epsilon classes or if they receive different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Money Market and Government Obligations Money Market Portfolios by the shareholders of each Portfolio at a special meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned and the sub-advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. The Advisory Agreement was approved with respect to the New York Municipal Money Market Portfolio by the Portfolio's shareholders at a special meeting of shareholders held November 21, 1991, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the New York Municipal Money Market Portfolio pursuant to an Administration Agreement dated November 5, 1991 and as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (together, the "Administration Agreements"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market and New York Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreements, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market and New York Municipal Money Market Portfolios.
BIMC is obligated to render administrative services to the Money Market and Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of Delegation Agreements, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $0 $0
New York Municipal Money Market
Portfolio $0 $0
Money Market Portfolio
Government Obligations Money
Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $448,548 $0 $0
New York Municipal Money Market $ 99,071 $0 $0
Portfolio
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For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $428,209 $0 $0
|
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
New York Municipal Money Market $ 67,204 $0
Portfolio $10,146
|
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Epsilon Classes pursuant to a Transfer Agency Agreement dated November 5, 1991 and supplements dated November 5, 1991 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of each of the Epsilon Classes, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Epsilon Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to
customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 entered into by the Distributor and the Fund on behalf of each of the Epsilon Classes, (the "Distribution Agreement") and separate Plans of Distribution, as amended, for each of the Epsilon Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Epsilon Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans relating to the Epsilon Classes of the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios were approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Epsilon Class under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Epsilon Class; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
During the period May 29, 1998 through August 31, 1998, the Fund paid distribution fees to PDI under the Plans for the Epsilon Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government
Obligations Money Market Portfolio, and the New York Municipal Money Market Obligations Portfolio in the aggregate amounts of $_____, $_____, $_____, and $_____, respectively. Of those amounts $_____, $_____, $_____, and $____, respectively, was paid to dealers with whom PDI had entered into dealer agreements, and $_____, $_____, $______, and $_____, respectively, was retained by PDI.
During the period September 1, 1997 through May 29, 1998, the Fund paid distribution fees to the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), under the Plans for the Epsilon Classes of each of the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio in the aggregate amounts of $_____, $_____, $_____, and $______, respectively. Of these amounts, $_____, $______, $______, and $_____, was paid to dealers with whom Counsellors had entered into dealer agreements, and $______, $______, $______, and $______, respectively, was retained by Counsellors.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a registered broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit
to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of a class in the Portfolio's cash, securities and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is calculated independently of the other classes of the Fund. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. The net asset value per share of each class is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each day, Monday through Friday, when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
Total return and yield may fluctuate daily and do not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of each such Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Epsilon 1 Common Stock, Epsilon 2 Common Stock, Epsilon 3 Common Stock and Epsilon 4 Common Stock constitute the Epsilon Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents 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 of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended
By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities shares of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants, and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. [ ], serves as the Fund's independent accountants.
Control Persons. As of ______________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record
approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
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Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
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Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
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BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
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BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
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FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
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Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
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Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
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BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
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Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
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BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
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William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
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BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
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Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
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Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
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BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
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Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
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Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
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SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
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Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
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N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal period ended August 31, 1998 has been filed with the Securities and Exchange Commission. The financial statements in such Annual Report (the "Financial Statements") are incorporated herein by reference into this Statement of Additional Information. The Financial
Statements included in the Annual Report for the Fund for the fiscal period
ended August 31, 1998 have been audited by RBB's independent accountants,
[ ], whose report thereon also appears and is
incorporated herein by reference. No other portions of the Annual Report are
incorporated herein by reference. The Financial Statements in such Annual Report
have been incorporated herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing. Copies of the
Annual Report may be obtained by calling toll-free (800) 311-9783.
APPENDIX A
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where default has actually occurred--and not where default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expect that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
ZETA FAMILY
Money Market Portfolio,
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of four classes (the "Zeta Shares") representing interests in four investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Zeta Family Prospectus of the Fund dated _____________, 1998, (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ____________, 1998.
CONTENTS
Prospectus
Page Page
---- ----------
General
Investment Objectives and Policies..................................
Directors and Officers..............................................
Investment Advisory, Distribution and Servicing Arrangements........
Portfolio Transaction ..............................................
Purchase and Redemption Information.................................
Valuation of Shares.................................................
Performance Information.............................................
Taxes ..............................................................
Additional Information Concerning Fund Shares.......................
Miscellaneous.......................................................
Appendix A..........................................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to four classes of shares (the "Zeta Classes") representing interests in four investment portfolios (the "Portfolios") of the Fund: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Zeta Classes are offered by the Prospectus dated _____________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market Portfolio or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market, Municipal Money Market or New York Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand.
The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market, Municipal Money Market and New York Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market, Municipal Money Market or New York Municipal Money Market Portfolios have such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, such Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of such Portfolio's commitment. It may be expected that such Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because such Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, such Portfolio expects that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When any of the Money Market Portfolio, Municipal Money Market Portfolio or the New York Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio, Municipal Money Market Portfolio or New York Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio expects that stand-by commitments will generally
be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for portfolio securities, which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. Any such Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation, which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The
Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those, which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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
portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's
adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or
(ii) the daily amortization of the difference between the purchase price and the
repurchase price specified in the repurchase agreement. The Portfolio's adviser
or sub-adviser will mark to market daily the value of the securities. Securities
subject to repurchase agreements will be held by the Fund's custodian in the
Federal Reserve/Treasury book-entry system or by another authorized securities
depository. Repurchase agreements are considered to be loans by a Portfolio
under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market and Government Obligations Portfolios may invest in multiple class pass-through securities, including collateralized mortgage obligations
("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMOs. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities, (2) securities that
(a) are rated (at the time of purchase) by two or more nationally recognized
statistical rating organizations ("Rating Organizations") in the two highest
rating categories for such securities (e.g., commercial paper rated "A-1" or
"A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at
the time of purchase) by the only Rating Organization rating the security in one
of its two highest rating categories for such securities; (3) short-term
obligations and subject to certain SEC requirements; long-term obligations that
have remaining maturities of 13 months or less, provided in each instance that
such obligations have no short-term rating and are comparable in priority and
security to a class of short-term obligations of the issuer that has been rated
in accordance with (2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have
comparable obligations rated by a Rating Organization ("Unrated Securities"),
provided that such securities are determined to be of comparable quality to a
security satisfying (2) or (3) above; and (5) subject to certain conditions
imposed under SEC rules, obligations guaranteed by persons which meet the
requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such
restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Special Considerations Relating To New York Municipal Obligations.
Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional
Information. The accuracy and completeness of the information contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies.
The forecast of the State's economy shows continued expansion during the 1998 calendar year, with employment growth gradually slowing as the year progresses. The financial and business service sectors are expected to continue to do well, while employment in the manufacturing and government sectors will post only small, if any, declines. On an average annual basis, the employment growth rate in the State is expected to be higher than in 1997 and the unemployment rate is expected to drop further to 6.1 percent. Personal income is expected to record moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the previous year as the recent robust growth in bonus payments moderates.
There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations
or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998-99 budget process. Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than-projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund
spending offsets, and other actions necessary to bring projected disbursements and receipts into balance.
Other actions taken in the 1997-98 adopted budget add further pressure to future budget balance in the State. For example, the fiscal effects of tax reductions adopted in the 1997-98 budget are projected to grow more substantially beyond the 1998-99 fiscal year, with incremental costs averaging in excess of $1.3 billion annually over the last three years of the tax reduction program. These incremental costs reflect the phase-in of State-funded school property tax and local income tax relief, the phase-out of the assessments on medical providers,
and reductions in estate and gift levies, utility gross receipts taxes, and the State sales tax on clothing. The full annual cost of the enacted tax reduction package is estimated at approximately $4.8 billion when fully effective in State fiscal year 2001-02. In addition, the 1997-98 budget included multi-year commitments for school aid and pre-kindergarten early learning programs which could add as much as $1.4 billion in costs when fully annualized in fiscal year 2001-02. These spending commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the 2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998-99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the School Tax Relief Program ("STAR"), expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and
City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million available for future needs, a balance of $400 million in the Tax Stabilization Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF is used to finance various legislative and executive initiatives. The CRF provides resource to help finance any extraordinary litigation costs during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1999 to 1998. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $62 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for
correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent.
The economic and financial condition of the State may be affected by various financial, social, economic and political factors. Those factors can be very complex, may vary from fiscal year to fiscal year, and are frequently the result of actions taken not only by the State and its agencies and instrumentalities, but also by entities, such as the federal government, that are not under the control of the State. In addition, the financial plan is based upon forecasts of national and State economic activity. Economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. Actual results, however, could differ materially and adversely from the projections set forth in a financial plan, and those projections may be changed materially and adversely from time to time.
In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the Division of Budget believes it could take similar actions should variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes.
The State ended its 1997-98 fiscal year in balance on a cash basis, with a General Fund cash surplus as reported by DOB of approximately $2.04 billion. The cash surplus was derived primarily from higher-than-anticipated receipts and lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205 million from the prior fiscal year. The balance is held in three accounts within the General Fund: the Tax Stabilization Reserve Fund, the Contingency Reserve Fund and the Community Projects Fund. The TSRF closing balance was $400 million, following a required deposit of $15 million (repaying a transfer made in 1991-92) and an extraordinary deposit of $68 million made from the 1997-98 surplus. The CRF closing balance was $68 million, following a $27 million deposit from the surplus. The CPF, which finances legislative initiatives, closed the fiscal year with a balance of $170 million, an increase of $95 million. The General Fund closing balance did not include $2.39 billion in the tax refund reserve account, of which $521 million was made available as a result of the Local Government Assistance Corporation ("LGAC") financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year (including net tax refund reserve account activity) totaled $34.55 billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97. General Fund disbursements and transfers to other funds were $34.35 billion, an annual increase of $1.45 billion or 4.41 percent.
Debt Limits and Outstanding Debt. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general obligation borrowing (i.e., borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State.
The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms, lease-purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual-obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. The State does not anticipate that it will be called upon to make any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("S&P") reduced its ratings on the State's general obligation bonds from A to A- and, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, S&P revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget, will be released on or before July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year.
The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated that approximately $191 million will be issued to finance agency equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems.
Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was released with the 1998-99 Executive Budget on January 20, 1998. As a part of that Plan, changes were proposed to the State's 1997-98 borrowing plan, including:
the delay in the issuance of COPs to finance welfare information systems until 1998-99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to maintain proper housing; (4) alleged responsibility of New York State officials to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates; (6) challenges to the constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non-Indian consumers on Indian reservations; (8) a challenge to the constitutionality of Clean Water/Clean Air Bond Act; and (9) a challenge to the Governor's application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a
Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1997-98 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under
these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short-term notes to the public again until 1979. In 1975, S&P suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications.
Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. As of June 30, 1997, MAC had outstanding an aggregate of approximately $4.267 billion of its bonds. MAC is authorized to issue bonds and notes to refund its outstanding bonds and notes and to fund certain reserves, without limitation as to principal amount, and to finance certain capital commitments to the Transit Authority and the New York City School Construction Authority through the 1997 fiscal year in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997.
The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The 1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-987 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the General Fund, primarily as a result of the use of the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million.
Although the City has maintained balanced budgets in each of its last seventeen fiscal years and is projected to achieve balanced operating results for the 1998 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions.
Additional tax increases and reductions in essential City services could adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's indebtedness within the forecast level of the constitutional restrictions on the amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's current financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to undertake only approximately $1.4 billion of seasonal financing. The
City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years.
Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary deficits that resulted in the establishment of a Supervisory Board for the City of Troy in 1994. The Supervisory Board's powers were increased in 1995, when Troy MAC was created to help Troy avoid default on certain obligations. The legislation creating Troy MAC prohibits the city of Troy from seeking federal bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities are scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional $21 million will be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those
local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. Twenty-one localities had outstanding indebtedness for deficit financing at the close of their fiscal year ending in 1996.
From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future.
Year 2000 Compliance. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result.
Investment Limitations
Money Market Portfolio and Municipal Money Market Portfolio. Neither the Money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the
dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the affected Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one Rating Organization, are rated (at the time of purchase) by two or more
Rating Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such Rating
Organization (as defined in the Prospectus) in its highest rating category
for such securities, (iii) have no short-term rating and are comparable in
priority and security to a class of short-term obligations of the issuer of
such securities that have been rated in accordance with (i) or (ii) above,
or (iv) are Unrated Securities that are determined to be of comparable
quality to such securities. Purchases of First Tier Securities that come
within categories (ii) and (iv) above will be approved or ratified by the
Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to
sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
2. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
3. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
4. Act as an underwriter.
5. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(5) purchase or sell real estate, provided that that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts;
(7) invest in oil, gas or mineral exploration or development programs;
(8) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(10) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the New York Municipal Money Market Portfolio may not (i) under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income
tax and does not constitute an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, the Portfolio will not purchase the securities of any issuer if as a result more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer, except that (a) up to 50% of the value of the Portfolio's assets may be invested without regard to this 5% limitation, provided that no more than 25% of the value of the Portfolio's assets are invested in the securities of any one issuer and (b) this 5% limitation does not apply to securities issued or guaranteed by the U.S. Government, or its agencies or instrumentalities. For purposes of this limitation, a security is considered to be issued by the governmental entity (or entities) whose assets and revenues back the security, or, with respect to a private activity bond that is backed only by the assets and revenues of a non-governmental user, by such non-governmental user. In
certain circumstances, the guarantor of a guaranteed security may also be considered to be an issuer in connection with such guarantee. This investment policy is not fundamental and may be changed by the Board of Directors without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Arnold M. Reichman, 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 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, Fahnestock
110 Wall Street & Co., Inc. (a registered
New York, NY 10005 broker-dealer); Prior to October
1996, Executive Vice President
of Gruntal & Co., Inc., (a
registered broker-dealer).
Francis J. McKay, 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer Center
Philadelphia, PA 19111 (biomedical research and medical care.)
Marvin E. Sternberg, 63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies
and precision coated abrasives);
since 1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Merchandise Mart, Inc.) and Mart
PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc. (shopping
centers); and since 1975, Director
and Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
Julian A. Brodsky, 64 Director Director and Vice-Chairman, Since
1234 Market Street 1969, Comcast Corporation;
16th Floor (cabletelevision and
Philadelphia, PA 19107-3723 communications) Director, Comcast
Cablevision of Philadelphia
(cable television and
communications) and Nextel
(wireless communications).
Donald van Roden, 73 Director Self-employed businessman. From
1200 Old Mill Lane and Chairman of the Board February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.
Edward J. Roach, 74 President and Treasurer Certified Public Accountant; Vice
Suite 100 Chairman of the Board, Fox Chase
Bellevue Park Cancer Center; Trustee Emeritus,
Corporate Center Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata
Wilmington, DE 19809 College; President or Vice
President and Treasurer of
various investment companies
advised by BlackRock
Institutional Management
Corporation; Director, The
Bradford Funds, Inc.
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Morgan R. Jones, 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse Child
Philadelphia, PA 19107-3496 Care Centers of America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board annually all persons to be nominated as directors of the Fund.
The Fund pays directors $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Pension or
Aggregate Retirement Benefits Estimated Annual
Compensation Accrued as Part of Benefits Upon
Name of Person/ Position from Registrant Fund Expenses Retirement
------------------------------ ---------------- ------------- ----------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the administrator to the Municipal Money Market and New York Municipal Money Market Portfolios and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios (except the New York Municipal Money Market Portfolio) with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market, Municipal Money Market and Government Obligations Portfolios. The advisory agreements relating to the Money Market and Government Obligations Money Market Portfolios are each dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is dated November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market and Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio
Municipal Money Market
Portfolio
Government Obligations Money
Market Portfolio
New York Municipal Money
Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
Municipal Money Market $ 201,095 $1,269,553 $ 14,921
Portfolio
Government Obligations Money $1,774,123 $ 647,063 $ 404,193
Market Portfolio
New York Municipal Money $ 21,831 $ 324,917 $ 0
Market Portfolio
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For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money Market Portfolio $ 190,687 $1,218,973 $ 17,576
Government Obligations Money Market
Portfolio $1,638,622 $ 671,811 $406,954
New York Municipal Money Market
Portfolio $ 2,709 $ 268,017 $ 0
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Each Portfolio bears all of its own expenses not specifically assumed by
BIMC. General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; and
(f) the cost of investment company literature and other publications provided by
the Fund to its directors and officers. The Zeta classes of the Fund pay their
own distribution fees, and may pay a different share than other classes of other
expenses (excluding advisory and custodial fees) if those expenses are actually
incurred in a different amount by the Zeta classes or if they receive different
services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Money Market and Government Obligations Money Market Portfolios by the shareholders of each Portfolio at a special
meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned and the sub-advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. The Advisory Agreement was approved with respect to the New York Municipal Money Market Portfolio by the Portfolio's shareholders at a special meeting of shareholders held November 21, 1991, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the New York Municipal Money Market Portfolio pursuant to an Administration Agreement dated November 5, 1991 and as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (together, the "Administration Agreements"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market and New York Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreements, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market and New York Municipal Money Market Portfolios.
BIMC is obligated to render administrative services to the Money Market and Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of Delegation Agreements, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- -------------- ------- --------------
Municipal Money Market Portfolio $0 $0
New York Municipal Money
Market Portfolio
Money Market Portfolio $0 $0
Government Obligations Money Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- -------------- ------- --------------
Municipal Money Market Portfolio $448,548 $0 $0
New York Municipal Money Market Portfolio $ 99,071 $0 $0
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For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- -------------- ------- --------------
Municipal Money Market Portfolio $428,209 $ 0 $0
New York Municipal Money Market Portfolio $ 67,204 $10,146 $0
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Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and
distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Zeta Classes pursuant to a Transfer Agency Agreement dated November 5, 1991 and supplements dated November 5, 1991 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of each of the Zeta Classes, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Zeta Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 entered into by the Distributor and the Fund on behalf of each of the Zeta Classes, (the "Distribution Agreement") and separate Plans of Distribution, as amended, for each of the Zeta Classes (collectively, the "Plans"), all of which were adopted by the Fund in
the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Zeta Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans relating to the Zeta Classes of the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios were approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Zeta Class under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Zeta Class; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a registered broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged
as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is
restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of a class in the Portfolio's cash, securities and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is calculated independently of the other classes of the Fund. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. The net asset value per share of each class is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business Day" means each day, Monday through Friday, when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of
the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
Total return and yield may fluctuate daily and do not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary
investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of each such Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B
Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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), 100 million shares are classified as Class W Common Stock, 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 (n/i Numeric Investors Growth & Value), 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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Zeta 1 Common Stock, Zeta 2 Common Stock, Zeta 3 Common Stock and Zeta 4 Common Stock constitute the Zeta Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Portfolios; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities shares of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory
agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants, and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. ( ), serves as the Fund's independent accountants.
Control Persons. As of ______________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
- INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
Credit Suisse Private Banking 7.52%
Dividend Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-31980
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
BEA INT'L EQUITY - ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
BEA GLOBAL TELE - COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
- ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
BEA HIGH YIELD - ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, MO 63303
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
Janis Claflin, Bruce Fetzer and 5.339%
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
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Public Inst. For Social Security 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
State Street Bank and Trust Company 8.675%
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
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Bank of America NT & SA 17.438%
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
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 29302
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
BOSTON PARTNERS Boston Partners Asset Mgmt LP 35.132%
BOND FUND One Financial Center 43rd Fl.
INSTITUTIONAL Boston, MA 02111
SHARES
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND - INSTITUTIONAL Boston, MA 02108
SHARES
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND - INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where default has actually occurred--and not where default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expect that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made
on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
ETA FAMILY
Money Market Portfolio,
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of four classes (the "Eta Shares") representing interests in four investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Eta Family Prospectus of the Fund dated _____________, 1998, (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ____________, 1998.
CONTENTS
Prospectus
Page Page
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General
Investment Objectives and Policies.............................................
Directors and Officers.........................................................
Investment Advisory, Distribution and Servicing Arrangements...................
Portfolio Transaction..........................................................
Purchase and Redemption Information............................................
Valuation of Shares............................................................
Performance Information........................................................
Taxes..........................................................................
Additional Information Concerning Fund Shares..................................
Miscellaneous..................................................................
Appendix A.....................................................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to four classes of shares (the "Eta Classes") representing interests in four investment portfolios (the "Portfolios") of the Fund: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Eta Classes are offered by the Prospectus dated _____________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market Portfolio or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market, Municipal Money Market or New York Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal
amount can be recovered through demand. The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market, Municipal Money Market and New York Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market, Municipal Money Market or New York Municipal Money Market Portfolios have such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, such Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of such Portfolio's commitment. It may be expected that such Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because such Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, such Portfolio expects that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When any of the Money Market Portfolio, Municipal Money Market Portfolio or the New York Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio, Municipal Money Market Portfolio or New York Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher price for
portfolio securities, which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. Any such Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation, which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those, which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section
4(2) paper is restricted as to disposition under the federal securities laws and
is generally sold to institutional investors such as the Fund which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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 Portfolio's adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark to market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market and Government Obligations Portfolios may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the
CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMOs. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market
Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the investment
adviser pursuant to guidelines adopted by the Board of Directors. Eligible
securities generally include (1) U.S. Government securities, (2) securities that
(a) are rated (at the time of purchase) by two or more nationally recognized
statistical rating organizations ("Rating Organizations") in the two highest
rating categories for such securities (e.g., commercial paper rated "A-1" or
"A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at
the time of purchase) by the only Rating Organization rating the security in one
of its two highest rating categories for such securities; (3) short-term
obligations and subject to certain SEC requirements; long-term obligations that
have remaining maturities of 13 months or less, provided in each instance that
such obligations have no short-term rating and are comparable in priority and
security to a class of short-term obligations of the issuer that has been rated
in accordance with (2)(a) or (b) above ("comparable obligations"); (4)
securities that are not rated and are issued by an issuer that does not have
comparable obligations rated by a Rating Organization ("Unrated Securities"),
provided that such securities are determined to be of comparable quality to a
security satisfying (2) or (3) above; and (5) subject to certain conditions
imposed under SEC rules, obligations guaranteed by persons which meet the
requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Special Considerations Relating To New York Municipal Obligations.
Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional Information. The accuracy and completeness of the information contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its
excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies.
The forecast of the State's economy shows continued expansion during the 1998 calendar year, with employment growth gradually slowing as the year progresses. The financial and business service sectors are expected to continue to do well, while employment in the manufacturing and government sectors will post only small, if any, declines. On an average annual basis, the employment growth rate in the State is expected to be higher than in 1997 and the unemployment rate is expected to drop further to 6.1 percent. Personal income is expected to record moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the previous year as the recent robust growth in bonus payments moderates.
There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998-99 budget process. Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than-projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund spending offsets, and other actions necessary to bring projected disbursements and receipts into balance.
Other actions taken in the 1997-98 adopted budget add further pressure to future budget balance in the State. For example, the fiscal effects of tax reductions adopted in the 1997-98 budget are projected to grow more substantially beyond the 1998-99 fiscal year, with incremental costs averaging in excess of $1.3 billion annually over the last three years of the tax reduction program. These incremental costs reflect the phase-in of State-funded school property tax and local income tax relief, the phase-out of the assessments on medical providers, and reductions in estate and gift levies, utility gross receipts taxes, and the State sales tax on clothing. The full annual cost of the enacted tax reduction package is estimated at approximately $4.8 billion when fully effective in State fiscal year 2001-02. In addition, the 1997-98 budget included multi-year commitments for school aid and pre-kindergarten early learning programs which could add as much as $1.4 billion in costs when fully annualized in fiscal year 2001-02. These spending commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the
2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998-99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the School Tax Relief Program ("STAR"), expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million available for future needs, a balance of $400 million in the Tax Stabilization Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF
is used to finance various legislative and executive initiatives. The CRF provides resource to help finance any extraordinary litigation costs during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1999 to 1998. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $62 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent.
The economic and financial condition of the State may be affected by various financial, social, economic and political factors. Those factors can be very complex, may vary from fiscal year to fiscal year, and are frequently the result of actions taken not only by the State and its agencies and instrumentalities, but also by entities, such as the federal government, that are not under the control of the State. In addition, the financial plan is based upon forecasts of national and State economic activity. Economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in
the national and the State economies. Actual results, however, could differ materially and adversely from the projections set forth in a financial plan, and those projections may be changed materially and adversely from time to time.
In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the Division of Budget believes it could take similar actions should variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes.
The State ended its 1997-98 fiscal year in balance on a cash basis, with a General Fund cash surplus as reported by DOB of approximately $2.04 billion. The cash surplus was derived primarily from higher-than-anticipated receipts and lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205 million from the prior fiscal year. The balance is held in three accounts within the General Fund: the Tax Stabilization Reserve Fund, the Contingency Reserve Fund and the Community Projects Fund. The TSRF closing balance was $400 million, following a required deposit of $15 million (repaying a transfer made in 1991-92) and an extraordinary deposit of $68 million made from the 1997-98 surplus. The CRF closing balance was $68 million, following a $27 million deposit from the surplus. The CPF, which finances legislative initiatives, closed the fiscal year with a balance of $170 million, an increase of $95 million. The General Fund closing balance did not include $2.39 billion in the tax refund reserve account, of which $521 million was made available as a result of the Local Government Assistance Corporation ("LGAC") financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year (including net tax refund reserve account activity) totaled $34.55 billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97. General Fund disbursements and transfers to other funds were $34.35 billion, an annual increase of $1.45 billion or 4.41 percent.
Debt Limits and Outstanding Debt. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general obligation borrowing (i.e., borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State.
The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms, lease-purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual-obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. The State does not anticipate that it will be called upon to make any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("S&P") reduced its ratings on the State's general obligation bonds from A to A- and, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, S&P revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget, will be released on or before July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year.
The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated that approximately $191 million will be issued to finance agency equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems.
Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was released with the 1998-99 Executive Budget on January 20, 1998. As a part of that Plan, changes were proposed to the State's 1997-98 borrowing plan, including: the delay in the issuance of COPs to finance welfare information systems until 1998-99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to maintain proper housing; (4) alleged responsibility of New York State officials
to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates; (6) challenges to the constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non-Indian consumers on Indian reservations; (8) a challenge to the constitutionality of Clean Water/Clean Air Bond Act; and (9) a challenge to the Governor's application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1997-98 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short-term notes to the public again until 1979. In 1975, S&P suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications.
Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. As of June 30, 1997, MAC had outstanding an aggregate of approximately $4.267 billion of its bonds. MAC is authorized to issue bonds and notes to refund its outstanding
bonds and notes and to fund certain reserves, without limitation as to principal amount, and to finance certain capital commitments to the Transit Authority and the New York City School Construction Authority through the 1997 fiscal year in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The 1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-987 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor
vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the General Fund, primarily as a result of the use of the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million.
Although the City has maintained balanced budgets in each of its last seventeen fiscal years and is projected to achieve balanced operating results for the 1998 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's indebtedness within
the forecast level of the constitutional restrictions on the amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's current financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to undertake only approximately $1.4 billion of seasonal financing. The City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years.
Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary deficits that resulted in the establishment of a Supervisory Board for the City of Troy in 1994. The Supervisory Board's powers were increased in 1995, when Troy MAC was created to help Troy avoid default on certain obligations. The legislation creating Troy MAC prohibits the city of Troy from seeking federal
bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities are scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional $21 million will be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. Twenty-one localities had outstanding indebtedness for deficit financing at the close of their fiscal year ending in 1996.
From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future.
Year 2000 Compliance. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result.
Investment Limitations
Money Market Portfolio and Municipal Money Market Portfolio. Neither the Money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations.
The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the affected Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one Rating Organization, are rated (at the time of purchase) by two or more
Rating Organizations in the highest rating category for such securities,
(ii) if rated by only one Rating Organization, are rated by such Rating
Organization (as defined in the Prospectus) in its highest rating category
for such securities, (iii) have no short-term rating and are comparable in
priority and security to a class of short-term obligations of the issuer of
such securities that have been rated in accordance with (i) or (ii) above,
or (iv) are Unrated Securities that are determined to be of comparable
quality to such securities. Purchases of First Tier Securities that come
within categories (ii) and (iv) above will be approved or ratified by the
Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
2. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
3. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
4. Act as an underwriter.
5. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except
that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(5) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts;
(7) invest in oil, gas or mineral exploration or development programs;
(8) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(10) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the New York Municipal Money Market Portfolio may not (i) under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax and does not constitute an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, the Portfolio will not purchase the securities of any issuer if as a result more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer, except that (a) up to 50% of the value of the Portfolio's assets may be invested without regard to this 5% limitation, provided that no more than 25% of the value of the Portfolio's assets are invested in the securities of any one issuer and (b) this 5% limitation does not apply to securities issued or guaranteed by the U.S. Government, or its agencies or instrumentalities. For purposes of this limitation, a security is considered to be issued by the governmental entity (or entities) whose assets and revenues back the security, or, with respect to a private activity bond that is backed only by the assets and revenues of a non-governmental user, by such non-governmental user. In certain circumstances, the guarantor of a guaranteed security may also be considered to be an issuer in connection with such guarantee. This investment policy is not fundamental and may be changed by the Board of Directors without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Arnold M. Reichman, 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 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, Fahnestock
110 Wall Street & Co., Inc. (a registered
New York, NY 10005 broker-dealer); Prior to October
1996, Executive Vice President
of Gruntal & Co., Inc., (a
registered broker-dealer).
-35-
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Francis J. McKay, 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer Center
Philadelphia, PA 19111 (biomedical research and medical
care.)
Marvin E. Sternberg, 63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies
and precision coated abrasives);
since 1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart, Inc.) and Mart
PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc. (shopping
centers); and since 1975, Director
and Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
Julian A. Brodsky, 64 Director Director and Vice-Chairman, Since
1234 Market Street 1969, Comcast Corporation;
16th Floor (cabletelevision and
Philadelphia, PA 19107-3723 communications) Director, Comcast
Cablevision of Philadelphia
(cable television and
communications) and Nextel
(wireless communications).
Donald van Roden, 73 Director and Chairman of the Board Self-employed businessman. From
1200 Old Mill Lane February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.
-36-
|
Edward J. Roach, 74 President and Treasurer Certified Public Accountant; Vice
Suite 100 Chairman of the Board, Fox Chase
Bellevue Park Cancer Center; Trustee Emeritus,
Corporate Center Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata
Wilmington, DE 19809 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, 59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath
1345 Chestnut Street LLP; Director, Rocking
Philadelphia, PA 19107-3496 Horse Child Care Centers of
America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board annually all persons to be nominated as directors of the Fund.
The Fund pays directors $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
Pension or Retirement
Aggregate Benefits Accrued as Estimated Annual
Compensation Part of Fund Benefits Upon
Name of Person/ Position from Registrant Expenses Retirement
------------------------ ---------------- --------------------- ----------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the administrator to the Municipal Money Market and New York Municipal Money Market Portfolios and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios (except the New York Municipal Money Market Portfolio) with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market, Municipal Money Market and Government Obligations Portfolios. The advisory agreements relating to the Money Market and Government Obligations Money Market Portfolios are each dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is dated November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market and Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio
Municipal Money Market
Portfolio
Government Obligations Money
Market Portfolio
New York Municipal Money
Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
Municipal Money Market $ 201,095 $1,269,553 $ 14,921
Portfolio
Government Obligations Money $1,774,123 $ 647,063 $404,193
Market Portfolio
New York Municipal Money $ 21,831 $ 324,917 $ 0
Market Portfolio
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For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees
as follows:
Fees Paid
(After waivers
Portfolios and reimbursements) Waivers Reimbursements
---------- ------------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money Market Portfolio $ 190,687 $1,218,973 $ 17,576
Government Obligations Money Market
Portfolio $1,638,622 $ 671,811 $406,954
New York Municipal Money Market
Portfolio $ 2,709 $ 268,017 0
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Each Portfolio bears all of its own expenses not specifically assumed by
BIMC. General expenses of the Fund not readily identifiable as belonging to a
portfolio of the Fund are allocated among all investment portfolios by or under
the direction of the Fund's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by a portfolio include, but
are not limited to, the following (or a portfolio's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses
or losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (d) any
extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; and
(f) the cost of investment company literature and other publications provided by
the Fund to its directors and officers. The Eta classes of the Fund pay their
own distribution fees, and may pay a different share than other classes of other
expenses (excluding advisory and custodial fees) if those expenses are actually
incurred in a different amount by the Eta classes or if they receive different
services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Money Market and Government Obligations Money Market Portfolios by the shareholders of each Portfolio at a special meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned and the sub-advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. The Advisory Agreement was approved with respect to the New York Municipal Money Market Portfolio by the Portfolio's shareholders at a special meeting of shareholders
held November 21, 1991, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the New York Municipal Money Market Portfolio pursuant to an Administration Agreement dated November 5, 1991 and as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (together, the "Administration Agreements"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market and New York Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreements, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market and New York Municipal Money Market Portfolios.
BIMC is obligated to render administrative services to the Money Market and Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of Delegation Agreements, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $0 $0
New York Municipal Money Market Portfolio
Money Market Portfolio $0 $0
Government Obligations Money Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $448,548 $0 $0
New York Municipal Money Market Portfolio $ 99,071 $0 $0
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For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $428,209 $ 0 $0
New York Municipal Money Market Portfolio $ 67,204 $10,146 $0
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Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets;
$.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Eta Classes pursuant to a Transfer Agency Agreement dated November 5, 1991 and supplements dated November 5, 1991 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of each of the Eta Classes, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Eta Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 entered into by the Distributor and the Fund on behalf of each of the Eta Classes, (the "Distribution Agreement") and separate Plans of Distribution, as amended, for each of the Eta Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Eta Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans relating to the Eta Classes of the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios were approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Eta Class under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Eta Class; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a registered broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None
of the Portfolios currently expects to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of a class in the Portfolio's cash, securities and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is calculated independently of the other classes of the Fund. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. The net asset value per share of each class is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern
Time), on each Business Day. "Business Day" means each day, Monday through Friday, when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
Total return and yield may fluctuate daily and do not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by IBC Money Fund
Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of each such Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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), 100 million shares are classified as Class W Common Stock, 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 (n/i Numeric Investors Growth & Value), 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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Eta 1 Common Stock, Eta 2 Common Stock, Eta 3 Common Stock and Eta 4 Common Stock constitute the Eta Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interest in the Money Market, Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a
meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities shares of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants, and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. ( ), serves as the Fund's independent accountants.
Control Persons. As of ______________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
BEA INT'L EQUITY - ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
- ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
BEA HIGH YIELD - ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
State Street Bank and Trust Company 8.675%
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
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Bank of America NT & SA 17.438%
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
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 29302
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
-
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND - INSTITUTIONAL Boston, MA 02108
SHARES
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND - INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class,
series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where default has actually occurred--and not where default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expect that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
THETA FAMILY
Money Market Portfolio,
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of four classes (the "Theta Shares") representing interests in four investment portfolios (the "Portfolios") of The RBB Fund, Inc. (the "Fund"): the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Theta Family Prospectus of the Fund dated _____________, 1998, (the "Prospectus"). A copy of the Prospectus may be obtained through the Fund's distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated ____________, 1998.
CONTENTS
Prospectus
Page Page
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General........................................................................
Investment Objectives and Policies.............................................
Directors and Officers.........................................................
Investment Advisory, Distribution and Servicing Arrangements...................
Portfolio Transaction ........................................................
Purchase and Redemption Information............................................
Valuation of Shares............................................................
Performance Information........................................................
Taxes ......................................................................
Additional Information Concerning Fund Shares..................................
Miscellaneous..................................................................
Appendix A.....................................................................
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No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. This Statement of Additional Information pertains to four classes of shares (the "Theta Classes") representing interests in four investment portfolios (the "Portfolios") of the Fund: the Money Market Portfolio, the Municipal Money Market Portfolio, the Government Obligations Money Market Portfolio and the New York Municipal Money Market Portfolio. The Theta Classes are offered by the Prospectus dated _____________, 1998. The Fund was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Portfolios. A description of ratings of Municipal Obligations and commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments held by the Money Market Portfolio or the Municipal Money Market Portfolio may have maturities of more than 13 months, provided: (i) the Portfolio is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. In determining the average weighted maturity of the Money Market, Municipal Money Market or New York Municipal Money Market Portfolio and whether a variable rate demand instrument has a remaining maturity of 13 months or less, each long-term instrument will be deemed by the Portfolio to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand.
The absence of an active secondary market with respect to particular variable and floating rate instruments could make it difficult for a Portfolio to dispose of variable or floating rate notes if the issuer defaulted on its payment obligations or during periods that the Portfolio is not entitled to exercise its demand right and the Portfolio could, for these or other reasons, suffer a loss with respect to such instruments.
When-Issued or Delayed Delivery Securities. The Money Market, Municipal Money Market and New York Money Market Portfolios may purchase "when-issued" and delayed delivery securities purchased for delivery beyond the normal settlement date at a stated price and yield. While the Money Market, Municipal Money Market or New York Municipal Money Market Portfolios have such commitments outstanding, such Portfolio will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash, or liquid securities of an amount at least equal to the purchase price of the securities to be purchased. Normally, the custodian for the relevant Portfolio will set aside portfolio securities to satisfy a purchase commitment and, in such a case, such Portfolio may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of such Portfolio's commitment. It may be expected that such Portfolio's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Because such Portfolio's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments, such Portfolio expects that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets absent unusual market conditions. When any of the Money Market Portfolio, Municipal Money Market Portfolio or the New York Municipal Money Market Portfolio engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in such Portfolio's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Stand-By Commitments. Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may enter into stand-by commitments with respect to obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their political subdivisions, agencies, instrumentalities and authorities (collectively, "Municipal Obligations") held in its portfolio. Under a stand-by commitment, a dealer would agree to purchase at the Portfolio's option a specified Municipal Obligation at its amortized cost value to the Portfolio plus accrued interest, if any. Stand-by commitments may be exercisable by the Money Market Portfolio, Municipal Money Market Portfolio or New York Municipal Money Market Portfolio at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred or assigned only with the instruments involved.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio expects that stand-by commitments will generally be available without the payment of any direct or indirect consideration. However, if necessary or advisable, either such Portfolio may pay for a stand-by commitment either in cash or by paying a higher
price for portfolio securities, which are acquired subject to the commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held by the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will not exceed 1/2 of 1% of the value of the relevant Portfolio's total assets calculated immediately after each stand-by commitment is acquired.
Each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio intends to enter into stand-by commitments only with dealers, banks and broker-dealers which, in the investment adviser's opinion, present minimal credit risks. Any such Portfolio's reliance upon the credit of these dealers, banks and broker-dealers will be secured by the value of the underlying Municipal Obligations that are subject to the commitment.
The Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and do not intend to exercise their rights thereunder for trading purposes. The acquisition of a stand-by commitment will not affect the valuation or assumed maturity of the underlying Municipal Obligation, which will continue to be valued in accordance with the amortized cost method. The actual stand-by commitment will be valued at zero in determining net asset value. Accordingly, where either such Portfolio pays directly or indirectly for a stand-by commitment, its cost will be reflected as an unrealized loss for the period during which the commitment is held by such Portfolio and will be reflected in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. For purposes of the Money Market Portfolio's investment policies with respect to bank obligations, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Investments in bank obligations will include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Money Market Portfolio. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Money Market Portfolio will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when its investment adviser believes that the risks associated with such investment are minimal.
Short Sales "Against the Box." In a short sale, the Government Obligations Money Market Portfolio sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Portfolio 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 Portfolio engages in a short sale, the collateral for the short position will be maintained by the Portfolio's custodian or a qualified sub-custodian. While the short sale is open, the Portfolio 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 Portfolio's long position. The Portfolio will not engage in short sales against the box for investment purposes. A Portfolio 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 Portfolio (or a security convertible or exchangeable for such security), or when the Portfolio 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 Portfolio 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 Portfolio'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 Portfolio owns. There will be certain additional transaction costs associated with short sales against the box, but the Portfolio will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. The dollar amount of short sales at any time will not exceed 25% of the net assets of the Government Obligations Money Market Portfolio, and the value of securities of any one issuer in which the Portfolio is short will not exceed the lesser of 2% of net assets or 2% of the securities of any class of an issuer.
Municipal Obligations. Municipal Obligations may include variable rate demand notes. Such notes are frequently not rated by credit rating agencies, but unrated notes purchased by the Portfolio will have been determined by the Portfolio's investment adviser to be of comparable quality at the time of the purchase to rated instruments purchasable by the Portfolio. Where necessary to ensure that a note is of eligible quality, the Portfolio will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. While there may be no active secondary market with respect to a particular variable rate demand note purchased by a Portfolio, the Portfolio may, upon the notice specified in the note, demand payment of the principal of the note at any time or during specified periods not exceeding 13 months, depending upon the instrument involved. The absence of such an active secondary market, however, could make it difficult for the Portfolio to dispose of a variable rate demand note if the issuer defaulted on its payment obligation or during the periods that the Portfolio is not entitled to exercise its demand rights. The Portfolio could, for this or other reasons, suffer a loss to the extent of the default. The Portfolio invests in variable rate demand notes only when the Portfolio's investment adviser deems the investment to involve minimal credit risk. The Portfolio's investment adviser also monitors the continuing creditworthiness of issuers of such notes to determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law affecting the issuance and use of proceeds of certain Municipal Obligations. A new definition of private activity bonds applies to many types of bonds, including those, which were industrial development bonds under prior law. Interest on private activity bonds issued after August 15, 1986 is tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. In addition, interest on Alternative Minimum Tax Securities that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities.
U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is issued in reliance on the "private placement" exemption from registration which is afforded by Section 4(2) of the Securities Act of 1933, as amended. Section 4(2) paper is restricted as to disposition under the federal securities laws and is generally sold to institutional investors such as the Fund which agree that they are purchasing the paper for investment and not with a view to public distribution. Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper normally is resold to other institutional investors through or with the assistance of investment dealers who make a market in the Section 4(2) paper, thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). The financial institutions with which a Portfolio 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 portfolio's adviser or sub-adviser. A Portfolio's adviser or sub-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
Portfolio's adviser or sub-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 either (i) accrued premium provided in the repurchase agreement or (ii) the daily amortization of the difference between the purchase price and the repurchase price specified in the repurchase agreement. The Portfolio's adviser or sub-adviser will mark to market daily the value of the securities. Securities subject to repurchase agreements will be held by the Fund's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Money Market and Government Obligations Portfolios may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make
payments on the CMOs. Investors may purchase beneficial interests in CMOs, which are known as "regular" interests or "residual" interests. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making required payments of principal of and interest on the CMOs, as well as the related administrative expenses of the issuer. Residual interests generally are junior to, and may be significantly more volatile than, "regular" CMOs. The Portfolios do not currently intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs may cause some or all of the classes of CMOs to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs in various ways. In certain structures (known as "sequential pay" CMOs), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs. Parallel pay CMOs are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
In general, the collateral supporting non-mortgage asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Lending of Securities. With respect to loans by the Government Obligations Money Market Portfolio of its portfolio securities as described in the Prospectus, such Portfolio would continue to accrue interest on loaned securities and would also earn income on loans. Any cash collateral received by such Portfolio in connection with such loans would be invested in short-term U.S. Government obligations. Any loan by the Government Obligations Money Market
Portfolio of its portfolio's securities will be fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible securities" that present minimal credit risks as determined by the investment adviser pursuant to guidelines adopted by the Board of Directors. Eligible securities generally include (1) U.S. Government securities, (2) securities that (a) are rated (at the time of purchase) by two or more nationally recognized statistical rating organizations ("Rating Organizations") in the two highest rating categories for such securities (e.g., commercial paper rated "A-1" or "A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) are rated (at the time of purchase) by the only Rating Organization rating the security in one of its two highest rating categories for such securities; (3) short-term obligations and subject to certain SEC requirements; long-term obligations that have remaining maturities of 13 months or less, provided in each instance that such obligations have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer that has been rated in accordance with (2)(a) or (b) above ("comparable obligations"); (4) securities that are not rated and are issued by an issuer that does not have comparable obligations rated by a Rating Organization ("Unrated Securities"), provided that such securities are determined to be of comparable quality to a security satisfying (2) or (3) above; and (5) subject to certain conditions imposed under SEC rules, obligations guaranteed by persons which meet the requisite rating requirements.
Illiquid Securities. None of the Portfolios may invest more than 10% of its net assets in illiquid securities (including with respect to all Portfolios other than the Municipal Money Market Portfolio, repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. Each Portfolio's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. With respect to the Money Market Portfolio, the Government Obligations Money Market Portfolio, and the New York Municipal Money Market Portfolio, repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and, except as to the Municipal Money Market Portfolio, repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Portfolios may purchase securities which are not registered under the Securities Act but which may 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 Portfolios' adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
Each Portfolio's investment adviser will monitor the liquidity of restricted securities in each Portfolio under the supervision of the Board of Directors. In reaching liquidity decisions, the investment 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).
Special Considerations Relating To New York Municipal Obligations. Some of the significant financial considerations relating to the Fund's investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional Information. The accuracy and completeness of the information contained in those official statements have not been independently verified.
State Economy. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an
important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies.
The forecast of the State's economy shows continued expansion during the 1998 calendar year, with employment growth gradually slowing as the year progresses. The financial and business service sectors are expected to continue to do well, while employment in the manufacturing and government sectors will post only small, if any, declines. On an average annual basis, the employment growth rate in the State is expected to be higher than in 1997 and the unemployment rate is expected to drop further to 6.1 percent. Personal income is expected to record moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the previous year as the recent robust growth in bonus payments moderates.
There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements.
State Budget. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998-99 budget process. Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than-projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund spending offsets, and other actions necessary to bring projected disbursements and receipts into balance.
Other actions taken in the 1997-98 adopted budget add further pressure to future budget balance in the State. For example, the fiscal effects of tax reductions adopted in the 1997-98 budget are projected to grow more substantially beyond the 1998-99 fiscal year, with incremental costs averaging in excess of $1.3 billion annually over the last three years of the tax reduction program. These incremental costs reflect the phase-in of State-funded school property tax and local income tax relief, the phase-out of the assessments on medical providers, and reductions in estate and gift levies, utility gross receipts taxes, and the State sales tax on clothing. The full annual cost of the enacted tax reduction package is estimated at approximately $4.8 billion when fully effective in State fiscal year 2001-02. In addition, the 1997-98 budget included multi-year commitments for school aid and pre-kindergarten early learning programs which could add as much as $1.4 billion in costs when fully annualized in fiscal year 2001-02. These spending commitments are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the 2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998-99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the School Tax Relief Program ("STAR"), expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million available for future needs, a balance of $400 million in the Tax Stabilization Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF is used to finance various legislative and executive initiatives. The CRF provides resource to help finance any extraordinary litigation costs during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1999 to 1998. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $62 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent.
The economic and financial condition of the State may be affected by various financial, social, economic and political factors. Those factors can be very complex, may vary from fiscal year to fiscal year, and are frequently the result of actions taken not only by the State and its agencies and instrumentalities, but also by entities, such as the federal government, that are not under the control of the State. In addition, the financial plan is based upon forecasts of national and State economic activity. Economic forecasts
have frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. Actual results, however, could differ materially and adversely from the projections set forth in a financial plan, and those projections may be changed materially and adversely from time to time.
In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the Division of Budget believes it could take similar actions should variances occur in its projections for the current fiscal year.
Recent Financial Results. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes.
The State ended its 1997-98 fiscal year in balance on a cash basis, with a General Fund cash surplus as reported by DOB of approximately $2.04 billion. The cash surplus was derived primarily from higher-than-anticipated receipts and lower spending on welfare, Medicaid, and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205 million from the prior fiscal year. The balance is held in three accounts within the General Fund: the Tax Stabilization Reserve Fund, the Contingency Reserve Fund and the Community Projects Fund. The TSRF closing balance was $400 million, following a required deposit of $15 million (repaying a transfer made in 1991-92) and an extraordinary deposit of $68 million made from the 1997-98 surplus. The CRF closing balance was $68 million, following a $27 million deposit from the surplus. The CPF, which finances legislative initiatives, closed the fiscal year with a balance of $170 million, an increase of $95 million. The General Fund closing balance did not include $2.39 billion in the tax refund reserve account, of which $521 million was made available as a result of the Local Government Assistance Corporation ("LGAC") financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year (including net tax refund reserve account activity) totaled $34.55 billion, an annual increase of $1.51 billion, or 4.57 percent over 1996-97. General Fund disbursements and transfers to other funds were $34.35 billion, an annual increase of $1.45 billion or 4.41 percent.
Debt Limits and Outstanding Debt. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general obligation borrowing (i.e., borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State.
The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms, lease-purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual-obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. The State does not anticipate that it will be called upon to make any payments pursuant to the State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("S&P") reduced its ratings on the State's general obligation bonds from A to Aand, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, S&P revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget, will be released on or before July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year.
The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated that approximately $191 million will be issued to finance agency equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems.
Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was released with the 1998-99 Executive Budget on January 20, 1998. As a part of that Plan, changes were proposed to the State's 1997-98 borrowing plan, including: the delay in the issuance of COPs to finance welfare information systems until 1998-99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
Litigation. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to maintain proper housing; (4) alleged responsibility of New York State officials
to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates; (6) challenges to the constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non-Indian consumers on Indian reservations; (8) a challenge to the constitutionality of Clean Water/Clean Air Bond Act; and (9) a challenge to the Governor's application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1997-98 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues.
Authorities. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State-supported or State-related.
Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues.
In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short-term notes to the public again until 1979. In 1975, S&P suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications.
Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. As of June 30, 1997, MAC had outstanding an aggregate of approximately $4.267 billion of its bonds. MAC is authorized to issue bonds and notes to refund its outstanding bonds and notes
and to fund certain reserves, without limitation as to principal amount, and to finance certain capital commitments to the Transit Authority and the New York City School Construction Authority through the 1997 fiscal year in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The 1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-987 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the General Fund, primarily as a result of the use of the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million.
Although the City has maintained balanced budgets in each of its last seventeen fiscal years and is projected to achieve balanced operating results for the 1998 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City's economic base.
The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's
indebtedness within the forecast level of the constitutional restrictions on the amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's current financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal year, the City expects to undertake only approximately $1.4 billion of seasonal financing. The City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years.
Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of
budgetary deficits that resulted in the establishment of a Supervisory Board for
the City of Troy in 1994. The Supervisory Board's powers were increased in 1995,
when Troy MAC was created to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the city of Troy from seeking federal
bankruptcy protection while Troy MAC bonds are outstanding.
Troy MAC has issued bonds to effect a restructuring of the City of Troy's
obligations.
Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities are scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional $21 million will be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. Twenty-one localities had outstanding indebtedness for deficit financing at the close of their fiscal year ending in 1996.
From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future.
Year 2000 Compliance. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result.
Investment Limitations
Money Market Portfolio and Municipal Money Market Portfolio. Neither the Money Market Portfolio nor the Municipal Money Market Portfolio may:
(1) borrow money, except from banks for temporary purposes (and with respect to the Money Market Portfolio only, except for reverse repurchase agreements) and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then, with respect to the Money Market Portfolio, in amounts not in excess of 10% of the value of a Portfolio's total assets at the time of such borrowing and, with respect to the Municipal Money Market Portfolio, in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of a Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of a Portfolio's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Portfolio, except that up to 25% of the value of a Portfolio's assets may be invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, a Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with a Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(5) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(6) purchase or sell real estate, provided that a Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that a Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and (except for the Municipal Money Market Portfolio) may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(11) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the Municipal Money Market Portfolio may not (i) under normal market conditions invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax, although the interest on such securities may constitute an item of tax preference for purposes of the federal alternative minimum tax, (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry.
In addition to the foregoing enumerated investment limitations, the Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some of which may be subject to repurchase agreements, but the Portfolio may make interest-bearing savings deposits in amounts not in excess of 5% of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of purchase, less than 25% of the value of the total assets of the Portfolio to be invested in the obligations of issuers in the banking industry, or in obligations, such as repurchase agreements, secured by such obligations (unless the Portfolio is in a temporary defensive position) or which would cause, at the time of purchase, more than 25% of the value of its total assets to be invested in the obligations of issuers in any other industry; and
(c) Invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations. The foregoing investment limitations cannot be changed without shareholder approval.
With respect to limitation (b) above concerning industry concentration (applicable to the Money Market Portfolio), the Portfolio will consider wholly-owned finance companies to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, and will divide utility companies according to their services. For example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The policy and practices stated in this paragraph may be changed without the affirmative vote of the holders of a majority of the affected Money Market Portfolio's outstanding shares, but any such change would be subject to any applicable requirements of the Securities and Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Money Market Portfolio will meet the following limitations on its investments in addition to the fundamental investment limitations described above. These limitations may be changed without a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the securities of any one issuer, other than issuers of U.S. Government securities, to 5% of its total assets, except that the Money Market Portfolio may invest more than 5% of its total assets in First Tier Securities of one issuer for a period of up to three business days. "First Tier Securities" include eligible securities that (i) if rated by more than one Rating Organization, are rated (at the time of purchase) by two or more Rating Organizations in the highest rating category for such securities, (ii) if rated by only one Rating Organization, are rated by such Rating Organization (as defined in the Prospectus) in its highest rating category for such securities, (iii) have no short-term rating and are comparable in priority and security to a class of short-term obligations of the issuer of such securities that have been rated in accordance with (i) or (ii) above, or (iv) are Unrated Securities that are determined to be of comparable quality to such securities. Purchases of First Tier Securities that come within categories (ii) and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier Securities, which are eligible securities other than First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier Securities of one issuer to the greater of 1% of its total assets or $1 million.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Government Obligations Money Market Portfolio. The Government Obligations Money Market Portfolio may not:
2. Purchase securities other than U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and repurchase agreements relating to such obligations. There is no limit on the amount of the Portfolio's assets which may be invested in the securities of any one issuer of obligations that the Portfolio is permitted to purchase.
3. Borrow money, except from banks for temporary purposes, and except for reverse repurchase agreements, and then in an amount not exceeding 10% of the value of the Portfolio's total assets, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate its assets except in connection with any such borrowing and in amounts not in excess of 10% of the value of the Portfolio's assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous.)
4. Act as an underwriter.
5. Make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations, may enter into repurchase agreements for securities, and may lend portfolio securities against collateral consisting of cash or securities
which are consistent with the Portfolio's permitted investments, which is equal at all times to at least 100% of the value of the securities loaned. There is no investment restriction on the amount of securities that may be loaned, except that payments received on such loans, including amounts received during the loan on account of interest on the securities loaned, may not (together with all non-qualifying income) exceed 10% of the Portfolio's annual gross income (without offset for realized capital gains) unless, in the opinion of counsel to the Fund, such amounts are qualifying income under federal income tax provisions applicable to regulated investment companies.
The foregoing investment limitations cannot be changed without shareholder approval.
The Portfolio may purchase securities on margin only to obtain short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and except for reverse repurchase agreements, and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300% for all borrowings of the Portfolio; or mortgage, pledge, hypothecate any of its assets except in connection with such borrowings and then in amounts not in excess of 10% of the value of the Portfolio's total assets at the time of such borrowing; or purchase portfolio securities while borrowings are in excess of 5% of the Portfolio's net assets. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Portfolio's securities by enabling the Portfolio to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient);
(2) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Portfolio may be deemed an underwriter under federal securities laws and except to the extent that the purchase of Municipal Obligations directly from the issuer thereof in accordance with the Portfolio's investment objective, policies and limitations may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof;
(5) purchase or sell real estate, provided that the Portfolio may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts;
(7) invest in oil, gas or mineral exploration or development programs;
(8) make loans except that the Portfolio may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment company except in connection with the merger, consolidation, acquisition or reorganization of all the securities or assets of such an issuer; or
(10) make investments for the purpose of exercising control or management.
In addition to the foregoing enumerated investment limitations, the New York Municipal Money Market Portfolio may not (i) under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from the regular federal income tax and does not constitute an item of tax preference for purposes of the federal alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operations; and (iii) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Portfolio to be invested in the obligations of the issuers in the same industry; provided that this limitation shall not apply to Municipal Obligations or governmental guarantees of Municipal Obligations; and provided, further, that for the purpose of this limitation only, private activity bonds that are considered to be issued by non-governmental users (see the second investment limitation above) shall not be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without shareholder approval.
So long as it values its portfolio securities on the basis of the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the New York Municipal Money Market Portfolio will meet the following limitation on its investments in addition to the fundamental investment limitations described above. This limitation may be changed without a vote of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not purchase any put if after the acquisition of the put the New York Municipal Money Market Portfolio has more than 5% of its total assets invested in instruments issued by or subject to puts from the same institution, except that the foregoing condition shall only be applicable with respect to 75% of the New York Municipal Money Market Portfolio's total assets. A "put" means a right to sell a specified
underlying instrument within a specified period of time and at a specified exercise price that may be sold, transferred or assigned only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Fund nor its investment adviser will review the proceedings relating to the issuance of Municipal Obligations or the basis for such opinions.
In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, the Portfolio will not purchase the securities of any issuer if as a result more than 5% of the value of the Portfolio's assets would be invested in the securities of such issuer, except that (a) up to 50% of the value of the Portfolio's assets may be invested without regard to this 5% limitation, provided that no more than 25% of the value of the Portfolio's assets are invested in the securities of any one issuer and (b) this 5% limitation does not apply to securities issued or guaranteed by the U.S. Government, or its agencies or instrumentalities. For purposes of this limitation, a security is considered to be issued by the governmental entity (or entities) whose assets and revenues back the security, or, with respect to a private activity bond that is backed only by the assets and revenues of a non-governmental user, by such non-governmental user. In certain circumstances, the guarantor of a guaranteed security may also be considered to be an issuer in connection with such guarantee. This investment policy is not fundamental and may be changed by the Board of Directors without shareholder approval.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business addresses and principal occupations during the past five years are:
Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Arnold M. Reichman, 50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 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, Fahnestock
110 Wall Street & Co., Inc. (a registered
New York, NY 10005 broker-dealer); Prior to October
1996, Executive Vice President
of Gruntal & Co., Inc., (a
registered broker-dealer).
32
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Francis J. McKay, 61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer Center
Philadelphia, PA 19111 (biomedical research and medical
care.)
Marvin E. Sternberg, 63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies
and precision coated abrasives);
since 1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart, Inc.) and Mart
PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc. (shopping
centers); and since 1975, Director
and Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
Julian A. Brodsky, 64 Director Director and Vice-Chairman, Since
1234 Market Street 1969, Comcast Corporation;
16th Floor (cabletelevision and
Philadelphia, PA 19107-3723 communications) Director, Comcast
Cablevision of Philadelphia
(cable television and communications)
and Nextel (wireless communications).
Donald van Roden, 73 Director Self-employed businessman. From
1200 Old Mill Lane and Chairman of the Board February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic
(auto service); Director,
Keystone Insurance Co.
33
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Principal Occupation
Name, Address and Age Position with Fund During Past Five Years
--------------------- ------------------ ----------------------
Edward J. Roach, 74 President and Treasurer Certified Public Accountant; Vice
Suite 100 Chairman of the Board, Fox Chase
Bellevue Park Cancer Center; Trustee Emeritus,
Corporate Center Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata
Wilmington, DE 19809 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, 59 Secretary Chairman of the law firm of
LLP Drinker Biddle & Reath LLP; Drinker Biddle & Reath
1345 Chestnut Street Director, Rocking HorseChild Care
Philadelphia, PA 19107-3496 Centers of America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of the Fund, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 Fund the firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of the Fund when the Board of Directors is not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board annually all persons to be nominated as directors of the Fund.
The Fund pays directors $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from the Fund in the following amounts:
Directors' Compensation
-----------------------
Pension or Retirement
Aggregate Benefits Accrued as Estimated Annual
Compensation Part of Fund Benefits Upon
Name of Person/ Position from Registrant Expenses Retirement
------------------------------ ---------------- --------------------- ----------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 the Fund adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which the Fund 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 Blackrock Institutional Management Corporation ("BIMC") (formerly known as "PNC Institutional Management Corporation"), the Portfolios' adviser, PNC Bank, National Association ("PNC Bank"), the Fund's custodian, PFPC Inc. ("PFPC"), the administrator to the Municipal Money Market and New York Municipal Money Market Portfolios and the Fund's transfer and dividend disbursing agent, and Provident Distributors, Inc. (the "Distributor" or "PDI"), the Fund's distributor, the Fund itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to the Fund. No officer, director or employee of BIMC, PNC Bank, PFPC or the Distributor currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The Portfolios have investment advisory agreements with BIMC. Although BIMC in turn has sub-advisory agreements respecting the Portfolios (except the New York Municipal Money Market Portfolio) with PNC Bank dated August 16, 1988, as of May __, 1998, BIMC assumed these advisory responsibilities from PNC Bank. Pursuant to the Sub-Advisory Agreements, PNC Bank would be entitled to receive a annual fee from BIMC for its sub-advisory services calculated at the annual rate of 75% of the fees received by BIMC on behalf of the Money Market, Municipal Money Market and Government Obligations Portfolios. The advisory agreements relating to the Money Market and Government Obligations Money Market Portfolios are each dated August 16, 1988, the advisory agreement relating to the New York Municipal Money Market Portfolio is dated November 5, 1991 and the advisory agreement relating to the Municipal Money Market Portfolio is dated April 21, 1992. Such advisory and sub-advisory agreements are hereinafter collectively referred to as the "Advisory Agreements."
For the fiscal year ended August 31, 1998, the Fund paid BIMC (excluding fees to PFPC, with respect to the Money Market and Government Obligations Portfolios, for administrative services obligated under the Advisory Agreements) advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio
Municipal Money Market
Portfolio
Government Obligations Money
Market Portfolio
New York Municipal Money
Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ---------------- ------- --------------
Money Market Portfolio $5,366,431 $3,603,130 $469,986
Municipal Money Market $ 201,095 $1,269,553 $ 14,921
Portfolio
Government Obligations Money $1,774,123 $ 647,063 $404,193
Market Portfolio
New York Municipal Money $ 21,831 $ 324,917 $ 0
Market Portfolio
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For the fiscal year ended August 31, 1996, the Fund paid BIMC advisory fees as follows:
Fees Paid
(After
Portfolios waivers and reimbursements) Waivers Reimbursements
---------- --------------------------- ------- --------------
Money Market Portfolio $4,174,375 $3,527,715 $342,158
Municipal Money Market Portfolio $ 190,687 $1,218,973 $ 17,576
Government Obligations Money Market
Portfolio $1,638,622 $ 671,811 $406,954
New York Municipal Money Market
Portfolio $ 2,709 $ 268,017 $ 0
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Each Portfolio bears all of its own expenses not specifically assumed by BIMC. General expenses of the Fund not readily identifiable as belonging to a portfolio of the Fund are allocated among all investment portfolios by or under the direction of the Fund's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of a portfolio by BIMC; (c) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against the Fund or a portfolio for violation of any law; (d) any extraordinary expenses; (e) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; and (f) the cost of investment company literature and other publications provided by the Fund to its directors and officers. The Theta classes of the Fund pay their own distribution fees, and may pay a different share than other classes of other expenses (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by the Theta classes or if they receive different services.
Under the Advisory Agreements, BIMC and PNC Bank will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or a Portfolio in connection with the performance of the Advisory Agreements, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of BIMC or PNC Bank in the performance of their respective duties or from reckless disregard of their duties and obligations thereunder.
The Advisory Agreements were each most recently approved July 29, 1998 by a vote of the Fund's Board of Directors, including a majority of those directors who are not parties to the Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such parties. The Advisory Agreements were each approved with respect to the Money Market and Government Obligations Money Market Portfolios by the shareholders of each Portfolio at a special meeting held on December 22, 1989, as adjourned. The investment advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held June 10, 1992, as adjourned and the sub-advisory agreement was approved with respect to the Municipal Money Market Portfolio by shareholders at a special meeting held on December 22, 1989. The Advisory Agreement was approved with respect to the New York Municipal Money Market Portfolio by the Portfolio's shareholders at a special meeting of
shareholders held November 21, 1991, as adjourned. Each Advisory Agreement is terminable by vote of the Fund's Board of Directors or by the holders of a majority of the outstanding voting securities of the relevant Portfolio, at any time without penalty, on 60 days' written notice to BIMC or PNC Bank. Each of the Advisory Agreements may also be terminated by BIMC or PNC Bank, respectively, on 60 days' written notice to the Fund. Each of the Advisory Agreements terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the New York Municipal Money Market Portfolio pursuant to an Administration Agreement dated November 5, 1991 and as the administrator to the Municipal Money Market Portfolio pursuant to an Administration and Accounting Services Agreement dated April 21, 1992 (together, the "Administration Agreements"). PFPC has agreed to furnish to the Fund on behalf of the Municipal Money Market and New York Municipal Money Market Portfolio statistical and research data, clerical, accounting, and bookkeeping services, and certain other services required by the Fund. PFPC has also agreed to prepare and file various reports with the appropriate regulatory agencies, and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund or a Portfolio in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder. In consideration for providing services pursuant to the Administration Agreements, PFPC receives a fee of .10% of the average daily net assets of the Municipal Money Market and New York Municipal Money Market Portfolios.
BIMC is obligated to render administrative services to the Money Market and Government Obligations Money Market Portfolio pursuant to the investment advisory agreements. Pursuant to the terms of Delegation Agreements, dated July 29, 1998, between BIMC and PFPC, however, BIMC has delegated to PFPC its administrative responsibilities to these Portfolios. The Fund pays administrative fees directly to PFPC.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $0 $0
New York Municipal Money Market Portfolio
Money Market Portfolio $0 $0
Government Obligations Money Market Portfolio
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For the fiscal year ended August 31, 1997, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $448,548 $0 $0
New York Municipal Money Market Portfolio $ 99,071 $0 $0
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For the fiscal year ended August 31, 1996, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimbursed expenses as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Municipal Money Market Portfolio $428,209 $ 0 $0
New York Municipal Money Market Portfolio $ 67,204 $10,146 $0
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Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of each Portfolio (b) holds and transfers portfolio securities on account of each Portfolio, (c) accepts receipts and makes disbursements of money on behalf of each Portfolio, (d) collects and receives all income and other payments and distributions on account of each Portfolio's portfolio securities and (e) makes periodic reports to the Fund's Board of Directors concerning each Portfolio's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon each Portfolio's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of
average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Portfolio, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund's Theta Classes pursuant to a Transfer Agency Agreement dated November 5, 1991 and supplements dated November 5, 1991 (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of each of the Theta Classes, (b) addresses and mails all communications by each Portfolio to record owners of shares of each such Class, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to the Fund's Board of Directors concerning the operations of each Theta Class. PFPC may, on 30 days' notice to the Fund, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $15.00 per account in each Portfolio for orders which are placed via third parties and relayed electronically to PFPC, and at an annual rate of $17.00 per account in each Portfolio for all other orders, exclusive of out-of-pocket expenses and also receives a fee for each redemption check cleared and reimbursement of its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder servicing agreements ("Shareholder Servicing Agreements") with various dealers ("Authorized Dealers") for the provision of certain support services to customers of such Authorized Dealers who are shareholders of the Portfolios. Pursuant to the Shareholder Servicing Agreements, the Authorized Dealers have agreed to prepare monthly account statements, process dividend payments from the Fund on behalf of their customers and to provide sweep processing for uninvested cash balances for customers participating in a cash management account. In addition to the shareholder records maintained by PFPC, Authorized Dealers may maintain duplicate records for their customers who are shareholders of the Portfolios for purposes of responding to customer inquiries and brokerage instructions. In consideration for providing such services, Authorized Dealers may receive fees from PFPC. Such fees will have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 entered into by the Distributor and the Fund on behalf of each of the Theta Classes, (the "Distribution Agreement") and separate Plans of Distribution, as amended, for each of the Theta Classes (collectively, the "Plans"), all of which were adopted by the Fund in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to distribute shares of each of the Theta Classes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee, to be calculated daily and paid monthly, at the annual rate set forth in the Prospectus. The Distributor currently proposes to reallow up to all of its distribution payments to broker/dealers for selling shares of each of the Portfolios based on a percentage of the amounts invested by their customers.
Each of the Plans relating to the Theta Classes of the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios were approved by the Fund's Board of Directors, including the directors who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors").
Among other things, each of the Plans provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of the Fund regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by the Fund's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Theta Class under the Plan shall not be materially increased without the affirmative vote of the holders of a majority of the Fund's shares in the affected Theta Class; and (4) while the Plan remains in effect, the selection and nomination of the 12b-1 Directors shall be committed to the discretion of the directors who are not interested persons of the Fund.
The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a registered broker-dealer.
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with remaining maturities of 13 months or less, except for securities that are subject to repurchase agreements (which in turn may have maturities of 13 months or less), and except that each of the Money Market Portfolio, Municipal Money Market Portfolio and New York Municipal Money Market Portfolio may purchase variable rate securities with remaining maturities of 13 months or more so long as such securities comply with conditions established by the SEC under which they may be considered to have remaining maturities of 13 months or less. Because all Portfolios intend to purchase only securities with remaining maturities of 13 months or less, their portfolio turnover rates will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by each such Portfolio, the turnover rate should not adversely affect such Portfolio's net asset value or net income. The Portfolios do not intend to seek profits through short term trading.
Purchases of portfolio securities by each of the Portfolios are made from dealers, underwriters and issuers; sales are made to dealers and issuers. None of the Portfolios currently expects to incur any brokerage
commission expense on such transactions because money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased directly from or sold directly to an issuer, no commissions or discounts are paid. It is the policy of such Portfolios to give primary consideration to obtaining the most favorable price and efficient execution of transactions. In seeking to implement the policies of such Portfolios, BIMC will effect transactions with those dealers it believes provide the most favorable prices and are capable of providing efficient executions. In no instance will portfolio securities be purchased from or sold to the Distributor or BIMC or any affiliated person of the foregoing entities except to the extent permitted by SEC exemptive order or by applicable law.
BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Portfolio prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Portfolio's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Portfolio would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts managed by BIMC are made independently of each other in light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Portfolio is concerned, in other cases it is believed to be beneficial to a Portfolio. A Portfolio will not purchase securities during the existence of any underwriting or selling group relating to such security of which BIMC or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the Fund's directors annually, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that BIMC not participate in or benefit from the sale to a Portfolio.
The Fund is required to identify any securities of its regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of its most recent fiscal year. As of August 31, 1998, the following portfolios held the following securities:
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Portfolio's shares by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Portfolio's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset value of each class of the Portfolios at $1.00 per share. Net asset value per share, the value of an individual share in a Portfolio, is computed by adding the value of the proportionate interest of a class in the Portfolio's cash, securities and other assets, subtracting the actual and accrued liabilities of the class and dividing the result by the number of outstanding shares of the class. The net asset value of each class of the Fund is calculated independently of the other classes of the Fund. A Portfolio's "net assets" equal the value of a Portfolio's investments and other securities less its liabilities. The net asset value per share of each class is computed twice each day, as of 12:00 noon (Eastern Time) and as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern Time), on each Business Day. "Business
Day" means each day, Monday through Friday, when both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently, the NYSE is closed weekends and 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 and subsequent Monday when one of these holidays falls on a Saturday or Sunday. The FRB is currently closed on weekends and the same holidays as the NYSE as well as Columbus Day and Veterans' Day.
The Fund calculates the value of the portfolio securities of each of the Portfolios by using the amortized cost method of valuation. Under this method the market value of an instrument is approximated by amortizing the difference between the acquisition cost and value at maturity of the instrument on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account. The market value of debt securities usually reflects yields generally available on securities of similar quality. When such yields decline, market values can be expected to increase, and when yields increase, market values can be expected to decline. In addition, if a large number of redemptions take place at a time when interest rates have increased, a Portfolio may have to sell portfolio securities prior to maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a security being higher or lower than its market price, the price a Portfolio would receive if the security were sold prior to maturity. The Fund's Board of Directors has established procedures for the purpose of maintaining a constant net asset value of $1.00 per share for each Portfolio, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. Should that deviation exceed 1/2 of 1% for a Portfolio, the Board of Directors will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends, and utilizing a net asset value per share as determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average portfolio maturity of 90 days or less, will not purchase any instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, will limit portfolio investments, including repurchase agreements (where permitted), to those United States dollar-denominated instruments that BIMC determines present minimal credit risks pursuant to guidelines adopted by the Board of Directors, and BIMC will comply with certain reporting and recordkeeping procedures concerning such credit determination. There is no assurance that constant net asset value will be maintained. In the event amortized cost ceases to represent fair value in the judgment of the Fund's Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being
valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Fund's Board of Directors.
PERFORMANCE INFORMATION
Each of the Portfolio's current and effective yields are computed using standardized methods required by the SEC. The annualized yields for a Portfolio are computed by: (a) determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven-calendar day period; (b) dividing the net change by the value of the account at the beginning of the period to obtain the base period return; and (c) annualizing the results (i.e., multiplying the base period return by 365/7). The net change in the value of the account reflects the value of additional shares purchased with dividends declared and all dividends declared on both the original share and such additional shares, but does not include realized gains and losses or unrealized appreciation and depreciation. Compound effective yields are computed by adding 1 to the base period return (calculated as described above), raising the sum to a power equal to 365/7 and subtracting 1.
Total return and yield may fluctuate daily and do not provide a basis for determining future returns and yields. Because the returns and yields of each Portfolio will fluctuate, they cannot be compared with returns and yields on savings accounts or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, return and yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the return and yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield.
The yields on certain obligations, including the money market instruments in which each Portfolio invests (such as commercial paper and bank obligations), are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moody's and S&P represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by a Portfolio, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, BIMC will consider whether a Portfolio should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the returns and/or yields of a Portfolio may be quoted and compared to those of other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of a Portfolio may be compared to the Donoghue's Money Fund Average, which is an average compiled by
IBC Money Fund Report(R), a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds.
TAXES
Each Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute its respective income to shareholders each year, so that each Portfolio generally will be relieved of federal income and excise taxes. If a Portfolio were to fail to so qualify: (1) the Portfolio would be taxed at regular corporate rates without any deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. For the Municipal Money Market Portfolio and New York Municipal Money Market Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of each such Portfolio's assets at the close of each quarter of the Fund's taxable year must consist of exempt-interest obligations.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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), 100 million shares are classified as Class W Common Stock, 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 (n/i Numeric Investors Growth & Value), 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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Theta 1 Common Stock, Theta 2 Common Stock, Theta 3 Common Stock and Theta 4 Common Stock constitute the Theta Classes, described herein. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Portfolios; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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 Fund does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Fund's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Fund have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Fund will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities shares of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants, and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Fund's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Fund's Articles of Incorporation, the Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Fund and the non-interested directors.
Independent Accountants. ( ), serves as the Fund's independent accountants.
Control Persons. As of ______________, 1998, to the Fund's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of the Fund indicated below. See "Additional Information Concerning Fund Shares" above. The Fund does not know whether such persons also beneficially own such shares.
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
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BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
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Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
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BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
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Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
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National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
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Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
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BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
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CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
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C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
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50
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
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BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
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BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
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BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
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Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
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Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
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Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
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Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
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FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
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Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
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BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
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Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
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New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
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Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
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BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
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Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
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State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
52
|
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
53
|
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE-COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
- ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
54
|
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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
------------------------------------ ------------------------------------------------ -------------------------------
55
|
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Public Inst. For Social Security 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
56
|
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
57
|
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
58
|
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
59
|
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
60
|
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. BIMC, PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
BIMC and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where default has actually occurred--and not where default is only expected. S&P changes ratings to "D" either:
On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expect that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. Examples include: obligations linked or indexed to equities, currencies, or commodities; obligations exposed to severe prepayment risk--such as interest-only or principal-only mortgage securities and obligations with unusually risky interest terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BOSTON PARTNERS LARGE CAP VALUE FUND
(Institutional, Advisor, and Investor Classes)
of
The RBB Fund, Inc.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of the Institutional, Advisor and Investor Classes (the "Shares") representing interests in the Boston Partners Large Cap Value Fund (the "Fund") of The RBB Fund, Inc. ("RBB"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Boston Partners Large Cap Value Fund Prospectuses dated ________, 1998 (together, the "Prospectuses"). A copy of any of the Prospectuses may be obtained from RBB by calling toll-free (800) 311-9783 or 9829. This Statement of Additional Information is dated ________, 1998.
CONTENTS
Institutional/
Advisor Investor
Prospectus Prospectus
Page Page Page
---- ---- ----
General..............................................
Investment Objectives and Policies...................
Directors and Officers............................... N/A N/A
Investment Advisory, Distribution
and Servicing Arrangements.........................
Portfolio Transactions...............................
Purchase and Redemption Information..................
Valuation of Shares..................................
Performance Information..............................
Taxes................................................
Additional Information Concerning
RBB Shares.........................................
Miscellaneous........................................ N/A N/A
Financial Statements................................. N/A N/A
Appendix A........................................... A-1 N/A N/A
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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 RBB or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. ("RBB") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. RBB was organized as a Maryland corporation on February 29, 1988. The Institutional Shares of the Fund were first issued on January 2, 1997. The Investor Shares of the Fund were first issued on January 16, 1997. As of the date of this Statement of Additional Information, no Advisor Shares have been issued.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Fund.
Additional Information on Fund Investments.
Lending of Fund Securities. The Fund may lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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.
Indexed Securities. The Fund may invest in indexed securities whose value is linked to securities indices. Most such securities have values which rise and fall according to the change in one or more specified indices, and may have characteristics similar to direct investments in the underlying securities. The Fund does not presently intend to invest more than 5% of net assets in indexed securities.
Convertible Securities. The Fund may invest in convertible securities. A convertible security is a bond, debenture, note, preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock of the same or a different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to nonconvertible debt securities in that they ordinarily provide a stable stream of income with generally higher yields than those of common stocks of the same or similar issuers. Convertible securities rank senior to common
stock in a corporation's capital structure but are usually subordinated to
comparable nonconvertible securities. While no securities investment is
completely without risk, investments in convertible 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.
The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed-income security.
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 does not presently intend to invest more than 5% of net assets in convertible securities.
Repurchase Agreements. The Fund may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. The financial institutions with whom the Fund may enter into repurchase agreements will be banks which the Adviser considers creditworthy pursuant to criteria approved by the Board of Directors and non-bank dealers of U.S. Government securities that are listed on the Federal Reserve Bank of New York's list of reporting dealers. The Adviser will consider the creditworthiness of a seller in determining whether to have the Fund enter into a repurchase agreement. The seller under a repurchase agreement will be required to maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. The Adviser will mark to market daily the value of the securities, and will, if necessary, require
the seller to maintain additional securities, to ensure that the value is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
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 the securities at an agreed-upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Fund will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement and will monitor the account to ensure that such value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase. The Fund may also enter into "dollar rolls," in which it sells fixed-income securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, 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 engage in reverse repurchase or dollar roll transactions involving more than 5% of the Fund's net assets.
U.S. Government Obligations. The Fund may purchase U.S. Government agency and instrumentality obligations that are debt securities issued by U.S. Government-sponsored enterprises and federal agencies. Some obligations of agencies and instrumentalities of the U.S. Government are supported by the full faith and credit of the U.S. Government or by U.S. Treasury guarantees, such as securities of the Government National Mortgage Association and the Federal Housing Authority; others, by the ability of the issuer to borrow, provided approval is granted, from the U.S. Treasury, such as securities of the Federal Home Loan Mortgage Corporation and others, only by the credit of the agency or instrumentality issuing the obligation, such as securities of the Federal National Mortgage Association and the Federal Loan Banks.
The Fund's net assets may be invested in obligations issued or guaranteed by the U.S. Treasury or the agencies or instrumentalities of the U.S. Government, including options and futures on such obligations. The maturities of U.S. Government securities usually range from three months to thirty years. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage
Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, the Asian-American Development Bank and the Inter-American Development Bank. The Fund does not presently intend to invest more than 5% of net assets in U.S. Government obligations.
Illiquid Securities. The Fund may not invest more than 15% of its net assets in illiquid securities (including repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. 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.
The Fund may purchase securities which are not registered under the Securities Act but which may 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 Fund's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Fund during any period that qualified institutional buyers become uninterested in purchasing restricted 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).
Hedging Investments. At such times as the Adviser deems it appropriate and consistent with the investment objective of the Fund, the Fund may invest in financial futures contracts and options on financial futures contracts. The purpose of such transactions is to hedge against changes in the market value of securities in the Fund caused by fluctuating interest rates, and to close out or offset its existing positions in such futures contracts or options as described
below. Such instruments will not be used for speculation. Futures contracts and options on futures contracts are discussed below.
Futures Contracts. The Fund may invest in financial futures contracts with respect to those securities listed on the S&P 500 Stock Index. Financial futures contracts obligate the seller to deliver a specific type of security called for in the contract, at a specified future time, and for a specified price. Financial futures contracts may be satisfied by actual delivery of the securities or, more typically, by entering into an offsetting transaction. There are risks that are associated with the use of futures contracts for hedging purposes. In certain market conditions, as in a rising interest rate environment, sales of futures contracts may not completely offset a decline in value of the portfolio securities against which the futures contracts are being sold. In the futures market, it may not always be possible to execute a buy or sell order at the desired price, or to close out an open position due to market conditions, limits on open positions, and/or daily price fluctuations. Risks in the use of futures contracts also result from the possibility that changes in the market interest rates may differ substantially from the changes anticipated by the Fund's investment adviser when hedge positions were established. The Fund does not presently intend to invest more than 5% of net assets in futures contracts.
Options on Futures. The Fund may purchase and write call and put options on futures contracts with respect to those securities listed on the S&P 500 Stock Index and enter into closing transactions with respect to such options to terminate an existing position. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract. The Fund may use options on futures contracts in connection with hedging strategies. The purchase of put options on futures contracts is a means of hedging against the risk of rising interest rates. The purchase of call options on futures contracts is a means of hedging against a market advance when the Fund is not fully invested.
There is no assurance that the Fund will be able to close out its financial futures positions at any time, in which case it would be required to maintain the margin deposits on the contract. There can be no assurance that hedging transactions will be successful, as there may be imperfect correlations (or no correlations) between movements in the prices of the futures contracts and of the securities being hedged, or price distortions due to market conditions in the futures markets. Such imperfect correlations could have an impact on the Fund's ability to effectively hedge its securities. The Fund does not presently intend to invest more than 5% of net assets in options on futures.
Bank and Corporate Obligations. The Fund may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits issued by U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. Investment in obligations of foreign banks or foreign branches of U.S. banks may entail risks that are different from those of investments in obligations of U.S. banks due to differences in political, regulatory and economic systems and conditions. The Fund may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
The Fund may invest in debt obligations, such as bonds and debentures, issued by corporations and other business organizations that are rated at the time of purchase within the three highest ratings categories of S&P or Moody's (or which, if unrated, are determined by the Adviser to be of comparable quality). Unrated securities will be determined to be of comparable quality to rated debt obligations if, among other things, other outstanding obligations of the issuers of such securities are rated A or better. See Appendix "A" for a description of corporate debt ratings.
Commercial Paper. The Fund may purchase commercial paper rated (at the time of purchase) "A-1" by S&P or "Prime-1" by Moody's or, when deemed advisable by the Fund's investment adviser, issues rated "A-2" or "Prime-2" by S&P or Moody's respectively. These rating symbols are described in Appendix "A" hereto. The Fund may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Fund's investment adviser pursuant to guidelines approved by the Fund's Board of Directors. Commercial paper issues in which the Fund may invest include securities issued by corporations without registration under the Securities Act of 1933, as amended (the "Securities Act") in reliance on the exemption from such registration afforded by Section 3(a)(3) thereof, and commercial paper issued in reliance on the so-called "private placement" exemption from registration which is afforded by Section 4(2) of the Securities Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition under the federal securities laws in that any resale must similarly be made in an exempt transaction. Section 4(2) paper is normally resold to other institutional investors through or with the assistance of investment dealers who make a market in Section 4(2) paper, thus providing liquidity. The Fund does not presently intend to invest more than 5% of its net assets in commercial paper.
Foreign Securities. The Fund may invest in foreign securities, either directly or indirectly through American Depository Receipts and European Depository Receipts. Investments in foreign securities involve higher costs than investments in U.S. securities, including higher transaction costs as well as the imposition of additional taxes by foreign governments. In addition, foreign investments may include additional risks associated with currency exchange rates, less complete financial information about the issuers, less market liquidity and political stability. Future political and economic information, the possible imposition of withholding taxes on interest income, the possible seizure or nationalization of foreign holdings, the possible establishment of exchange controls, or the adoption of other governmental restrictions, might adversely affect the payment of principal and interest on foreign obligations.
Although the Fund may invest in securities denominated in foreign currencies, the Fund values its securities and other assets in U.S. dollars. As a result, the net asset value of a Fund's shares may fluctuate with U.S. dollar exchange rates as well as the price changes of the Fund's securities in the various local markets and currencies. Thus, an increase in the value of the U.S. dollar compared to the currencies in which the Fund makes its investments could reduce the effect of increases and magnify the effect of decreases in the price of the Fund's securities in their local markets. Conversely, a decrease in the value of the U.S. dollar may have the opposite effect of magnifying the effect of increases and reducing the effect of decreases in the prices of the Fund's securities in foreign markets. In addition to favorable and unfavorable currency
exchange rate developments, the Fund is subject to the possible imposition of exchange control regulations or freezes on convertibility of currency.
Investment Limitations.
RBB has adopted the following fundamental investment limitations which may not be changed without the affirmative vote of the holders of a majority of the Fund's outstanding Shares (as defined in Section 2(a)(42) of the Investment Company Act). 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; (For purposes of this Limitation No. 1, any collateral arrangements, if applicable, with respect to the writing of options, futures contracts and options on futures contracts, and collateral arrangements with respect to initial and variation margin are not deemed to be a pledge of assets.)
2. Issue any senior securities, except as permitted under the 1940 Act; (For purposes of this Limitation No. 2, neither the collateral arrangements with respect to options and futures identified in Limitation No. 1, nor the purchase or sale of futures or related options, are deemed to be the issuance of senior securities.)
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 (a) in securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein or (b) in real estate investment trusts;
5. Purchase or sell commodities or commodity contracts, except that a Fund may deal in forward foreign exchange between currencies of the different countries in which it may invest and purchase and sell stock index and currency options, stock index futures, financial futures and currency futures contracts and related options on such futures;
6. Make loans, except through loans of portfolio instruments and repurchase agreements, provided that for purposes of this restriction the acquisition of bonds, debentures or other debt instruments or interests therein and investment in government obligations, loan participations and assignments, short-term commercial paper, certificates of deposit and bankers' acceptances shall not be deemed to be the making of a loan;
7. Invest 25% or more of its assets, taken at market value at the time of each investment, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities); or
8. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
The Fund may invest in securities issued by other investment companies within the limits prescribed 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.
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.
DIRECTORS AND OFFICERS
The directors and executive officers of RBB, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name Address and Age with Fund During Past Five Years
-------------------- --------- ----------------------
*Arnold M. Reichman -50 Director Senior Managing Director, Chief Operating
466 Lexington Avenue Officer and Assistant Secretary, Warburg
New York, NY 10017 Pincus Asset Management, Inc.; Director
and Executive Officer of Counsellors
Securities Inc.; Director/Trustee of
various investment companies advised by
Warburg Pincus Asset Management, Inc.
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Position Principal Occupation
Name Address and Age with Fund During Past Five Years
-------------------- --------- ----------------------
*Robert Sablowsky -59 Director Senior Vice President, Fahnestock Co.,
110 Wall Street Inc. (a registered broker-dealer); Prior
New York, NY 10005 to October 1996, Executive Vice President
of Gruntal & Co., Inc. (a registered
broker-dealer).
Francis J. McKay -61 Director Since 1963, Executive Vice President, Fox
7701 Burholme Avenue Chase Cancer Center (biomedical research
Philadelphia, PA 19111 and medical care).
Marvin E. Sternberg -63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies and
precision coated abrasives); since 1968,
Director and President, Mart MMM, Inc.
(formerly Montgomeryville Merchandise Mart
Inc.) and Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart, Inc.)
(shopping centers); and since 1975,
Director and Executive vice President,
Cellucap Mfg. Co., Inc. (manufacturer of
disposable headwear).
Julian A. Brodsky -74 Director Director and Vice Chairman since 1969
1234 Market Street Comcast Corporation (cable television and
16th Floor communications); Director Comcast
Philadelphia, PA 19107-3723 Cablevision of Philadelphia (cable
television and communications) and Nextel
(wireless communications).
Donald van Roden -73 Director Self-employed businessman. From February
1200 Old Mill Lane and 1980 to March 1987, Vice Chairman,
Wyomissing, PA 19610 Chairman SmithKline Beecham Corporation
of the (pharmaceuticals); Director, AAA
Board Mid-Atlantic (auto service); Director,
Keystone Insurance Co.
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Position Principal Occupation
Name Address and Age with Fund During Past Five Years
-------------------- --------- ----------------------
Edward J. Roach -74 President Certified Public Accountant; Vice Chairman
Suite 100 and of the Board, Fox Chase Cancer Center;
Bellevue Park Treasurer Trustee Emeritus, Pennsylvania School for
Corporate Center the Deaf; Trustee Emeritus, Immaculata
400 Bellevue Parkway College; President or Vice President and
Wilmington, DE 19809 Treasurer of various investment companies
advised by Blackrock Institutional
Management Corporation; Director, The
Bradford Funds, Inc.
Morgan R. Jones -59 Secretary Chairman of the law firm of Drinker Biddle
Drinker Biddle & Reath LLP & Reath LLP; Director, Rocking Horse Child
1345 Chestnut Street Care Centers of America, Inc
Philadelphia, PA 19107-3496
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of RBB, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 RBB 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 RBB 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 RBB.
RBB pays directors $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from RBB in the following amounts:
Directors' Compensation
Pension or
Retirement Estimated
Aggregate Benefits Annual
Compensation Accrued as Benefits
Name of Person/ from Part of Fund Upon
Position Registrant Expenses Retirement
-------- ---------- -------- ----------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 RBB adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which RBB 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 RBB's advisers, custodians, administrators and distributor, RBB itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to RBB. No officer, director or employee of Boston Partners Asset Management, L.P. ("Boston Partners" or the "Adviser") or the Distributor currently receives any compensation from RBB.
INVESTMENT ADVISORY, DISTRIBUTION
AND SERVICING ARRANGEMENTS
Advisory Agreement. Boston Partners renders advisory services to the Fund pursuant to an Investment Advisory Agreement dated October 16, 1996 (the "Advisory Agreement"). Boston Partners' general partner is Boston Partners, Inc.
Boston Partners has investment discretion for the Fund and will make all decisions affecting assets in the Fund under the supervision of RBB's Board of Directors and in accordance with the Fund's stated policies. Boston Partners will select investments for the Fund. For its services to the Fund, Boston Partners is entitled to receive a monthly advisory fee under the Advisory Agreement computed at an annual rate of 0.75% of the Fund's average daily net assets.
For the fiscal year ended August 31, 1998, the Fund paid Boston Partners advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Large Cap Value Fund
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For the fiscal period ended August 31, 1997, the Fund paid Boston Partners advisory fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Large Cap Value Fund $5,635 $57,752 $26,104
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Each class of the Fund bears its own expenses not specifically assumed by Boston Partners. General expenses of RBB not readily identifiable as belonging to a portfolio of RBB are allocated among all investment portfolios by or under the direction of RBB's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of a portfolio by Boston Partners; (c) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against RBB or a portfolio for violation of any law; (d) any extraordinary expenses; (e) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (f) the cost of investment
company literature and other publications provided by RBB to its directors
and officers; (g) organizational costs; (h) fees to the investment adviser and
PFPC; (i) fees and expenses of officers and directors who are not affiliated
with a portfolios' investment adviser or Distributor; (j) taxes; (k) interest;
(l) legal fees; (m) custodian fees; (n) auditing fees; (o) brokerage fees and
commissions; (p) certain of the fees and expenses of registering and qualifying
the Fund and its shares for distribution under federal and state securities
laws; (q) expenses of preparing prospectuses and statements of additional
information and distributing annually to existing shareholders that are not
attributable to a particular class of shares of RBB; (r) the expense of reports
to shareholders, shareholders' meetings and proxy solicitations that are not
attributable to a particular class of shares of RBB; (s) fidelity bond and
directors' and officers' liability insurance premiums; (t) the expense of using
independent pricing services; and (u) other expenses which are not expressly
assumed by a portfolio's investment adviser under its advisory agreement with
the portfolio. Each class of the Fund pays its own distribution fees, if
applicable, and may pay a different share than other classes of other expenses
(excluding advisory and custodial fees) if those expenses are actually incurred
in a different amount by such class or if it receives different services.
Under the Advisory Agreement, Boston Partners will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or RBB in connection with the performance of the Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of Boston Partners in the performance of its respective duties or from reckless disregard of its duties and obligations thereunder.
The Advisory Agreement was most recently approved on July 29, 1998 by vote of RBB'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 initial shareholder of each class of the Fund. The Advisory Agreement is terminable by vote of RBB'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 Boston Partners. The Advisory Agreement may also be terminated by Boston Partners on 60 days' written notice to RBB. The Advisory Agreement terminates automatically in the event of its assignment.
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the 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 RBB's Board of Directors concerning the Fund's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all of its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee, which is calculated based upon the Fund's average
daily gross assets as follows: $.18 per $1,000 on the first $100 million of average daily gross assets; $.15 per $1,000 on the next $400 million of average daily gross assets; $.125 per $1,000 on the next $500 million of average daily gross assets; and $.10 per $1,000 on average daily gross assets over $1 billion, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement dated November 5, 1991, as supplemented (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of the Fund, (b) addresses and mails all communications by the Fund to record owners of the Shares, 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 RBB's Board of Directors concerning the operations of the Fund. PFPC may, on 30 days' notice to RBB, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $12 per account in the Fund, exclusive of out-of-pocket expenses, and also receives reimbursement of its out-of-pocket expenses.
Administration Agreement. PFPC serves as administrator to the Fund pursuant to an Administration and Accounting Services Agreement dated October 16, 1996, (the "Administration Agreement"). PFPC has agreed to furnish to the Fund statistical and research data, clerical, accounting and bookkeeping services, and certain other services required by the Fund. In addition, PFPC has agreed to prepare and file various reports with the appropriate regulatory agencies and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund. For its services to the Fund, PFPC is entitled to receive a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis. PFPC is currently waiving one-half of its minimum annual fee.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Large Cap Value Fund
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For the period ended August 31, 1997, the Fund paid PFPC administration fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Large Cap Value Fund $25,000 $25,000 $0
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The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by RBB or the Fund in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder.
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, (the "Distribution Agreement"), entered into by the Distributor and RBB on behalf of the Institutional, Investor and Advisor Classes, and Plans of Distribution, as amended, for the Investor and Advisor Classes (together, the "Plans"), which were adopted by RBB in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to solicit orders for the sale of Fund Shares. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee under the Plans, to be calculated daily and paid monthly by the Investor and Advisor Class, at the annual rate set forth in the Prospectus.
For the period May 29, 1998 through August 31, 1998, the Fund paid the Distributor fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Large Cap Value Fund
(Investor)
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For the period September 1, 1997 through May 29, 1998, both the Institutional Class and Investor Class of the Fund paid the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), a wholly-owned subsidiary of Warburg Pincus Asset Management, Inc., with a principal business address of 466 Lexington Avenue, New York, New York 10071, distribution fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Large Cap Value Fund
(Institutional)
Boston Partners
Large Cap Value Fund
(Investor)
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For the period ended August 31, 1997, the Fund paid Counsellors fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Large Cap Value Fund $3,325 $0 $0
(Institutional)
Boston Partners
Large Cap Value Fund $155 $0 $0
(Investor)
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On October 16, 1996, the Plans were approved by RBB's Board of Directors, including the directors who are not "interested persons" of RBB and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans ("12b-1 Directors"). RBB believes that the Plans may benefit the Fund by increasing sales of Fund Shares.
Among other things, the Plans provide that: (1) the Distributor shall be required to submit quarterly reports to the directors of RBB regarding all amounts expended under the Plans and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plans will continue in effect only so long as they are approved at least annually, and any material amendment thereto is approved, by RBB's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Investor and Advisor Classes under the Plans shall not be materially increased without shareholder approval; and (4) while the Plans remain in effect, the selection and nomination of RBB's directors who are not "interested persons" of RBB (as
defined in the 1940 Act) shall be committed to the discretion of such directors who are not "interested persons" of RBB.
Each of Mr. Sablowsky and Mr. Reichman, directors of RBB, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
Administrative Services Agent
Provident Distributors, Inc. ("PDI") provides certain administrative services to the Institutional Class of the Fund that are not provided by PFPC, pursuant to an Administrative Services Agreement, dated May 29, 1998, between RBB and PDI. These services include furnishing data processing and clerical services, acting as liaison between the Funds and various service providers and coordinating the preparation of annual, semi-annual and quarterly reports. As compensation for such administrative services, PDI is entitled to a monthly fee calculated at the annual rate of .15% of each Fund's average daily net assets. PDI is currently waiving fees in excess of .03% of each fund's average daily net assets. For the period May 29, 1998 through August 31, 1998, the Institutional Class of the Fund paid PDI $______ in administrative services fees, and PDI waived $______.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors, Boston Partners is responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Fund. In purchasing or selling portfolio securities, Boston Partners will seek to obtain the best net price and the most favorable execution of orders. To the extent that the execution and price offered by more than one broker/dealer are comparable, the Adviser may effect transactions in portfolio securities with broker/dealers who provide research, advice or other services such as market investment literature.
For the fiscal year ended August 31, 1998, the Fund paid brokerage commissions aggregating $______.
For the fiscal year ended August 31, 1998, the Fund paid commissions in the aggregate amount of $______ to brokers on account of research services on transactions in the aggregate amount of $_________.
RBB is required to identify securities of its "regular brokers or dealers" that the Fund has acquired during the most recent fiscal period. At August 31, 1998, the Fund held the following securities of RBB's regular brokers or dealers:
[Information here]
Investment decisions for the Fund and for other investment accounts managed by Boston Partners are made independently of each other in the light of differing conditions.
However, the same investment decision may be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Fund is concerned, in other cases it is believed to be beneficial to the Fund.
The Fund expects that its annual portfolio turnover rate will not exceed 100%. A high rate (100% or more) of portfolio turnover involves correspondingly greater brokerage commissions expenses and other transaction costs that 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 a portfolio's annual sales or purchases of portfolio securities (exclusive of purchases or sales of securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the portfolio during the year.
PURCHASE AND REDEMPTION INFORMATION
RBB reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Fund's shares by making payment in whole or in part in securities chosen by RBB 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. RBB 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, RBB 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 the NYSE is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (RBB may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
The computation of the hypothetical offering price per share of an Institutional and Investor Share of the Fund based on the value of the Fund's net assets on August 31, 1998 and the Fund's Institutional and Investor Shares outstanding on such date is as follows:
Boston Partners Large Cap Value Fund
Institutional Shares Investor Shares
-------------------- ---------------
Net Assets.......................... $ $
Outstanding Shares..................
Net Asset Value per Share........... $ $
Maximum Sales Charge................ N/A N/A
Maximum Offering Price to Public....
$ $
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On August 31, 1998, no Advisor Shares were issued and outstanding.
VALUATION OF SHARES
The net asset values per share of each class of the Fund are calculated as of the close of the NYSE, generally 4:00 p.m. Eastern Time on each Business Day. "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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. Net asset value per share, the value of an individual share in a fund, is computed by adding the value of the proportionate interest of each class in a 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 the class. The net asset values of each class are calculated independently of the other classes. Securities that are listed on stock exchanges 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 evaluation. 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 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 RBB'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.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current
payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by RBB's Board of Directors.
PERFORMANCE INFORMATION
Total Return. The Fund may from time to time advertise its "average annual total return." The Fund computes 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
1, 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.
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The Fund, when advertising its "aggregate total return," computes 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.
Calculated according to the SEC Rules, the average annual total return for the Fund was as follows:
Average
Fund Return
---- ------
For the fiscal year ended August 31, 1998.
Large Cap Value Fund - Institutional %
Large Cap Value Fund - %
For the period ended August 31, 1997.*
Large Cap Value Fund - Institutional %
Large Cap Value Fund - Investor %
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Calculated according to the above formula, the aggregate total return for the Fund was as follows:
Average
Fund Return
---- ------
For the fiscal year ended August 31, 1998.
Large Cap Value Fund - Institutional %
Large Cap Value Fund - Investor %
For the period ended August 31, 1997.*
Large Cap Value Fund - Institutional %
Large Cap Value Fund - Investor %
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*The Institutional Class commenced operations on January 2, 1997 and the Investor Class commenced operations on January 16, 1997.
Investors should note that the total return figures are based on historical earnings and are not intended to indicate future performance.
TAXES
The following is only a summary of certain additional tax considerations generally affecting the Fund and its shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning. Investors are urged to consult their tax advisers with specific reference to their own tax situation.
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 that it distributes to shareholders, provided that it distributes an amount equal to the sum of (a) at least 90% of its investment company taxable income (net taxable investment income and the excess of net short-term capital gain over net long-term capital loss, if any, for the year) and (b) at least 90% of its net tax-exempt interest income, if any, for the year (the "Distribution Requirement") and satisfies certain other requirements of the Code that are described below. Distributions of investment company taxable income made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year will satisfy the Distribution Requirement.
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").
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 Fund 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 net capital gain (excess of net long-term capital gain over net short-term capital loss), if any, for each taxable year. Such gain is distributed as a capital gain dividend and is taxable to shareholders as long-term capital gain, regardless of the length of time the shareholder has held his shares, whether such gain was recognized by the Fund prior to the date on which a shareholder acquired shares of the Fund and whether the distribution was paid in cash or reinvested in shares. The aggregate amount of distributions designated by 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 capital loss or 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 Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
In the case of corporate shareholders, distributions (other than capital gain dividends) of the Fund for any taxable year generally qualify for the dividends received
deduction 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" if it has been received from a domestic corporation. Distributions of net investment income received by the Fund from investments in debt securities will be taxable to shareholders as ordinary income and will not be treated as "qualifying dividends" for purposes of the dividends received deduction. The Fund 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 Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
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.
A shareholder will recognize gain or loss upon a redemption of shares or an exchange of shares of the Fund for shares of another Boston Partners Fund upon exercise of the exchange privilege, to the extent of any difference between the price at which the shares are redeemed or exchanged and the price or prices at which the shares were originally purchased for cash.
The Code imposes a non-deductible 4% excise tax on regulated investment companies that do not distribute with respect to each calendar year an amount equal to 98% of their ordinary income for the calendar year plus 98% of their capital gain net income for the 1-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. 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 Fund will be required in certain cases to withhold and remit to the United States Treasury 31% of dividends paid to any shareholder (1) who has provided either an incorrect tax identification number or no number at all, (2) who is subject to backup withholding by the Internal Revenue Service for failure to report the receipt of interest or dividend income properly, or (3) who has failed to certify to the Fund that he is not subject to backup withholding or that he is an "exempt recipient."
The foregoing general discussion of federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Although the 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.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Classes QQ, RR and SS Common Stock constitute the Boston Partners Large Cap Value Fund. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interest in the Money Market, Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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.
RBB does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. RBB's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of RBB 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, RBB will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of the 1940 Act or applicable state law, or otherwise, to the holders of the outstanding securities of an investment
company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities, as defined in the 1940 Act, of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under Rule 18f-2, 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, as defined in the 1940 Act, of such portfolio. However, Rule 18f-2 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 RBB's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law or by RBB's Articles of Incorporation, RBB 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 entitled to vote on the matter 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 RBB and the non-interested directors.
Independent Accountants. ( ), serves as RBB's independent accountants.
Control Persons. As of _________, 1998, to RBB's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of each class of RBB indicated below. See "Additional Information Concerning RBB Shares" above. RBB does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
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Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
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Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
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As of the above date, directors and officers as a group owned less than one percent of the shares of RBB.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal period ended August 31, 1998 has been filed with the Securities and Exchange Commission. The financial statements in such Annual Report are incorporated herein by reference into this Statement of Additional Information. The financial statements included in the Annual Report for the Fund for the fiscal period ended August 31, 1998 have been audited by RBB's independent accountants, ( ), whose report thereon also appears and is incorporated herein by reference. No other portions of the Annual Report are incorporated herein by reference. The financial statements in such Annual Report have been incorporated herein in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. Copies of the Annual Report may be obtained by calling toll-free (800) 311-9783.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BOSTON PARTNERS MID CAP VALUE FUND
(Institutional and Investor Classes)
of
The RBB Fund, Inc.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of the Investor and Institutional Classes (the "Shares") representing interests in the Boston Partners Mid Cap Value Fund (the "Fund") of The RBB Fund, Inc. ("RBB"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Boston Partners Mid Cap Value Fund Prospectuses, dated _________ 1998 (together, the "Prospectuses"). A copy of any of the Prospectuses may be obtained from RBB by calling toll-free (800) 311-9783 or 9829. This Statement of Additional Information is dated _________ 1998.
CONTENTS
Institutional Investor
Prospectus Prospectus
Page Page Page
---- ------------- ----------
General............................................................
Investment Objectives and Policies.................................
Directors and Officers............................................. N/A N/A
Investment Advisory, Distribution
and Servicing Arrangements.......................................
Portfolio Transactions.............................................
Purchase and Redemption Information................................
Valuation of Shares................................................
Performance and Yield Information..................................
Taxes..............................................................
Additional Information Concerning
RBB Shares......................................................
Miscellaneous...................................................... N/A N/A
Financial Statements............................................... N/A N/A
Appendix A......................................................... A-1 N/A N/A
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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 RBB or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. ("RBB") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. RBB was organized as a Maryland corporation on February 29, 1988. The Institutional and Investor Shares of the Fund were first issued on June 2, 1997.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Fund.
Additional Information on Fund Investments.
Lending of Fund Securities. The Fund may lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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. The Fund does not presently intend to invest more than 5% of net assets in securities lending.
Indexed Securities. The Fund may invest in indexed securities whose value is linked to securities indices. Most such securities have values which rise and fall according to the change in one or more specified indices, and may have characteristics similar to direct investments in the underlying securities. The Fund does not presently intend to invest more than 5% of net assets in indexed securities.
Repurchase Agreements. The Fund may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. The financial institutions with whom the Fund may enter into repurchase agreements will be banks which the Adviser considers creditworthy pursuant to criteria approved by the Board of Directors and non-bank dealers of U.S. Government securities that are listed on the Federal Reserve Bank of New York's list of reporting dealers. The Adviser will consider the creditworthiness of a seller in determining whether to have the Fund enter into a repurchase agreement. The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. The Adviser will mark to market daily the value of the securities, and will, if necessary, require the seller to maintain additional securities, to ensure that the value is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
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 the securities at an agreed-upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940 (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Fund will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement and will monitor the account to ensure that such value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase. The Fund may also enter into "dollar rolls," in which it sells fixed income securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, 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 engage in reverse repurchase or dollar roll transactions involving more than 5% of the Fund's net assets.
U.S. Government Obligations. The Fund may purchase U.S. Government agency and instrumentality obligations that are debt securities issued by U.S. Government-sponsored enterprises and federal agencies. Some obligations of agencies and instrumentalities of the U.S. Government are supported by the full faith and credit of the U.S. Government or by U.S. Treasury guarantees, such as securities of the Government National Mortgage Association and the Federal Housing Authority; others, by the ability of the issuer to borrow, provided approval is granted, from the U.S. Treasury, such as securities of the Federal Home Loan Mortgage Corporation and others, only by the credit of the agency or instrumentality issuing the obligation, such as securities of the Federal National Mortgage Association and the Federal Loan Banks.
The Fund's net assets may be invested in obligations issued or guaranteed by the U.S. Treasury or the agencies or instrumentalities of the U.S. Government, including options and futures on such obligations. The maturities of U.S. Government securities usually range from three months to thirty years. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, the Asian-American Development Bank and the Inter-American Development Bank. The Fund does not presently intend to invest more than 5% of net assets in U.S. Government obligations.
Illiquid Securities. The Fund may not invest more than 15% of its net assets in illiquid securities (including repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. 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.
The Fund may purchase securities which are not registered under the Securities Act but which may 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 Fund's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Fund during any period that qualified institutional buyers become uninterested in purchasing restricted 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).
Hedging Investments. At such times as the Adviser deems it appropriate and consistent with the investment objective of the Fund, the Fund may invest in financial futures contracts and options on financial futures contracts. The purpose of such transactions is to hedge against changes in the market value of securities in the Fund caused by fluctuating interest rates
and to close out or offset its existing positions in such futures contracts or options as described below. Such instruments will not be used for speculation. Futures contracts and options on futures are discussed below.
Futures Contracts. The Fund may invest in financial futures contracts with respect to those securities listed on the S&P 500 Stock Index. Financial futures contracts obligate the seller to deliver a specific type of security called for in the contract, at a specified future time, and for a specified price. Financial futures contracts may be satisfied by actual delivery of the securities or, more typically, by entering into an offsetting transaction. There are risks that are associated with the use of futures contracts for hedging purposes. In certain market conditions, as in a rising interest rate environment, sales of futures contracts may not completely offset a decline in value of the portfolio securities against which the futures contracts are being sold. In the futures market, it may not always be possible to execute a buy or sell order at the desired price, or to close out an open position due to market conditions, limits on open positions, and/or daily price fluctuations. Risks in the use of futures contracts also result from the possibility that changes in the market interest rates may differ substantially from the changes anticipated by the Fund's investment adviser when hedge positions were established. The Fund does not presently intend to invest more than 5% of net assets in futures contracts.
Options on Futures. The Fund may purchase and write call and put options on futures contracts with respect to those securities listed on the S&P 500 Stock Index and enter into closing transactions with respect to such options to terminate an existing position. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract. The Fund may use options on futures contracts in connection with hedging strategies. The purchase of put options on futures contracts is a means of hedging against the risk of rising interest rates. The purchase of call options on futures contracts is a means of hedging against a market advance when the Fund is not fully invested.
There is no assurance that the Fund will be able to close out its financial futures positions at any time, in which case it would be required to maintain the margin deposits on the contract. There can be no assurance that hedging transactions will be successful, as there may be imperfect correlations (or no correlations) between movements in the prices of the futures contracts and of the securities being hedged, or price distortions due to market conditions in the futures markets. Such imperfect correlations could have an impact on the Fund's ability to effectively hedge its securities. The Fund does not presently intend to invest more than 5% of net assets in options on futures.
Bank and Corporate Obligations. The Fund may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits issued by U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. Investment in obligations of foreign banks or foreign branches of U.S. banks may entail risks that are different from those of investments in obligations of U.S. banks due to differences in political, regulatory and economic systems and conditions. The Fund may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
The Fund may invest in debt obligations, such as bonds and debentures, issued by corporations and other business organizations that are rated at the time of purchase within the three highest ratings categories of S&P or Moody's (or which, if unrated, are determined by the Adviser to be of comparable quality). Unrated securities will be determined to be of the comparable quality to rated debt obligations if, among other things, other outstanding obligations of the issuers of such securities are rated A or better. See Appendix "A" for a description of corporate debt ratings.
Commercial Paper. The Fund may purchase commercial paper rated (at the time of purchase) "A-1" by S&P or "Prime-1" by Moody's or, when deemed advisable by the Fund's investment adviser, issues rated "A-2" or "Prime-2" by S&P or Moody's, respectively. These rating symbols are described in Appendix "A" hereto. The Fund may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Fund's investment adviser pursuant to guidelines approved by the Fund's Board of Directors. Commercial paper issues in which the Fund may invest include securities issued by corporations without registration under the Securities Act of 1933, as amended (the "Securities Act") in reliance on the exemption from such registration afforded by Section 3(a)(3) thereof, and commercial paper issued in reliance on the so-called "private placement" exemption from registration, which is afforded by Section 4(2) of the Securities Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition under the federal securities laws in that any resale must similarly be made in an exempt transaction. Section 4(2) paper is normally resold to other institutional investors through or with the assistance of investment dealers who make a market in Section 4(2) paper, thus providing liquidity. The Fund does not presently intend to invest more than 5% of its net assets in commercial paper.
Foreign Securities. The Fund may invest in foreign securities, either directly or indirectly through American Depository Receipts and European Depository Receipts. Investments in foreign securities involve higher costs than investments in U.S. securities, including higher transaction costs as well as the imposition of additional taxes by foreign governments. In addition, foreign investments may include additional risks associated with currency exchange rates, less complete financial information about the issuers, less market liquidity and political stability. Future political and economic information, the possible imposition of withholding taxes on interest income, the possible seizure or nationalization of foreign holdings, the possible establishment of exchange controls, or the adoption of other governmental restrictions, might adversely affect the payment of principal and interest on foreign obligations.
Although the Fund may invest in securities denominated in foreign currencies, the Fund values its securities and other assets in U.S. dollars. As a result, the net asset value of a Fund's shares may fluctuate with U.S. dollar exchange rates as well as the price changes of the Fund's securities in the various local markets and currencies. Thus, an increase in the value of the U.S. dollar compared to the currencies in which the Fund makes its investments could reduce the effect of increases and magnify the effect of decreases in the price of the Fund's securities in their local markets. Conversely, a decrease in the value of the U.S. dollar may have the opposite effect of magnifying the effect of increases and reducing the effect of decreases in the prices of the Fund's securities in its foreign markets. In addition to favorable and unfavorable
currency exchange rate developments, the Fund is subject to the possible imposition of exchange control regulations or freezes on convertibility of currency.
Investment Limitations.
RBB 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; (For purposes of this Limitation No. 1, any collateral arrangements, if applicable, with respect to the writing of options, futures contracts and options on futures contracts, and collateral arrangements with respect to initial and variation margin are not deemed to be a pledge of assets.)
2. Issue any senior securities, except as permitted under the 1940 Act; (For purposes of this Limitation No. 2, neither the collateral arrangements with respect to options and futures identified in Limitation No. 1, nor the purchase or sale of futures or related options, are deemed to be the issuance of senior securities.)
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 (a) in securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein or (b) in real estate investment trusts;
5. Purchase or sell commodities or commodity contracts, except that a Fund may deal in forward foreign exchanges 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;
7. Invest 25% or more of its assets, taken at market value at the time of each investment, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities); or
8. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase, more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
The Fund may invest in securities issued by other investment companies within the limits prescribed 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.
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.
DIRECTORS AND OFFICERS
The directors and executive officers of RBB, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
*Arnold M. Reichman -50 Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and Executive
Officer of Counsellors Securities Inc.;
Director/Trustee of various investment
companies advised by Warburg Pincus Asset
Management, Inc.
-8-
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
*Robert Sablowsky -59 Director Senior Vice President, Fahnestock Co.,
110 Wall Street Inc. (a registered broker-dealer); Prior
New York, NY 10005 to October 1996, Executive Vice
President of Gruntal & Co., Inc. (a
registered broker-dealer).
Francis J. McKay -61 Director Since 1963, Executive Vice President,
7701 Burholme Avenue Fox Chase Cancer Center (biomedical
Philadelphia, PA 19111 research and medical care).
Marvin E. Sternberg -63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies and
precision coated abrasives); since 1968,
Director and President, Mart MMM, Inc.
(formerly Montgomeryville Merchandise
Mart Inc.) and Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart, Inc.)
(shopping centers); and since 1975,
Director and Executive Vice President,
Cellucap Mfg. Co., Inc. (manufacturer of
disposable headwear).
Julian A. Brodsky -64 Director Director and Vice Chairman since 1969
1234 Market Street Comcast Corporation (cable television
16th Floor and communications); Director Comcast
Philadelphia, PA 19107-3723 Cablevision of Philadelphia (cable
television and communications) and
Nextel (wireless communications).
Donald van Roden -73 Director Self-employed businessman. From
1200 Old Mill Lane and February 1980 to March 1987, Vice
Wyomissing, PA 19610 Chairman Chairman, SmithKline Beecham Corporation
of the (pharmaceuticals); Director, AAA
Board Mid-Atlantic (auto service);
Director, Keystone Insurance Co.
-9-
|
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Edward J. Roach -74 President Certified Public Accountant; Vice
Suite 100 and Chairman of the Board, Fox Chase Cancer
Bellevue Park Treasurer Center; Trustee Emeritus, Pennsylvania
Corporate Center School for the Deaf; Trustee Emeritus,
400 Bellevue Parkway Immaculata College; President or Vice
Wilmington, DE 19809 President and Treasurer of various
investment companies advised by
BlackRock Institutional Management
Corporation; Director, The Bradford
Funds, Inc.
Morgan R. Jones -59 Secretary Chairman of the law firm of Drinker
Drinker Biddle & Reath LLP Biddle & Reath LLP; Director, Rocking Horse
1345 Chestnut Street Child Care Centers of vbAmerica, Inc.
Philadelphia, PA 19107-3496
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of RBB, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 RBB 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 RBB 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 RBB.
RBB pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser of the Fund or the Distributor and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of RBB and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any
committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from RBB in the following amounts:
Directors' Compensation
Pension or Retirement Estimated
Name of Person/ Aggregate Compensation Benefits Accrued Annual Benefits
Position from Registrant as Part of Fund Expenses Upon Retirement
--------------- ---------------------- ------------------------ ---------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
|
On October 24, 1990 RBB adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which RBB 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 RBB's advisers, custodians, administrators and distributor, RBB itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to RBB. No officer, director or employee of Boston Partners Asset Management, L.P. ("Boston Partners" or the "Adviser") or the Distributor currently receives any compensation from RBB.
INVESTMENT ADVISORY, DISTRIBUTION
AND SERVICING ARRANGEMENTS
Advisory Agreement. Boston Partners renders advisory services to the Fund pursuant to an Investment Advisory Agreement dated May 30, 1997 (the "Advisory Agreement"). Boston Partners' general partner is Boston Partners, Inc.
Boston Partners has investment discretion for the Fund and will make all decisions affecting assets in the Fund under the supervision of RBB's Board of Directors and in accordance with the Fund's stated policies. Boston Partners will select investments for the
Fund. For its services to the Fund, Boston Partners is entitled to receive a monthly advisory fee under the Advisory Agreement computed at an annual rate of 0.80% of the Fund's average daily net assets. Boston Partners is currently waiving advisory fees in excess of ____% of average daily net assets.
For the fiscal year ended August 31, 1998, the Fund paid Boston Partners advisory fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ------------------ ------- --------------
Boston Partners
Mid Cap Value Fund
|
For the period ended August 31, 1997, the Fund paid Boston Partners advisory fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ------------------ ------- --------------
Boston Partners $0 $3,606 $32,554
Mid Cap Value Fund
|
Each class of the Fund bears its own expenses not specifically assumed by Boston Partners. General expenses of RBB not readily identifiable as belonging to a portfolio of RBB are allocated among all investment portfolios by or under the direction of RBB's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of a portfolio by Boston Partners; (c) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against RBB or a portfolio for violation of any law; (d) any extraordinary expenses; (e) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (f) the cost of investment company literature and other publications provided by RBB to its directors and officers; (g) organizational costs; (h) fees to the investment adviser and PFPC; (i) fees and expenses of officers and directors who are not affiliated with a portfolios' investment adviser or Distributor; (j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees; (o) brokerage fees and commissions; (p) certain of the fees and expenses of registering and qualifying the Fund and its shares for distribution under federal and state securities laws; (q) expenses of preparing prospectuses and statements of additional information and distributing annually to existing shareholders that are not attributable to a particular class of shares of RBB;
(r) the expense of reports to shareholders, shareholders' meetings and proxy
solicitations that are not attributable to a particular class of shares of RBB;
(s) fidelity bond and directors' and officers' liability insurance premiums; (t)
the expense of using independent pricing services; and (u) other expenses which
are not expressly assumed by a portfolio's investment adviser under its advisory
agreement with the portfolio. Each class of the Fund pays its own distribution
fees, if applicable, and may pay a different share than other classes of other
expenses (excluding advisory and custodial fees) if those expenses are actually
incurred in a different amount by such class or if it receives different
services.
Under the Advisory Agreement, Boston Partners will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or RBB in connection with the performance of the Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of Boston Partners in the performance of its duties or from reckless disregard of its duties and obligations thereunder.
The Advisory Agreement was most recently approved on July 29, 1998 by vote of RBB'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 initial shareholder of each class of the Fund. The Advisory Agreement is terminable by vote of RBB'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 Boston Partners. The Advisory Agreement may also be terminated by Boston Partners on 60 days' written notice to RBB. The Advisory Agreement terminates automatically in the event of its assignment.
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the 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 RBB's Board of Directors concerning the Fund's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all of its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee, which is calculated based upon the Fund's average daily gross assets as follows: $.18 per $1,000 on the first $100 million of average daily gross assets; $.15 per $1,000 on the next $400 million of average daily gross assets; $.125 per $1,000 on the next $500 million of average daily gross assets; and $.10 per $1,000 on average daily gross assets over $1 billion, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement dated November 5, 1991, as supplemented (the "Transfer Agency Agreement"), under which
PFPC (a) issues and redeems shares of the Fund, (b) addresses and mails all communications by the Fund to record owners of the Shares, 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 RBB's Board of Directors concerning the operations of the Fund. PFPC may, on 30 days' notice to RBB, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund, under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $12 per account in the Fund, exclusive of out-of-pocket expenses, and also receives reimbursement of its out-of-pocket expenses.
Administration Agreement. PFPC serves as administrator to the Fund pursuant to an Administration and Accounting Services Agreement dated May 30, 1997, (the "Administration Agreement"). PFPC has agreed to furnish to the Fund statistical and research data, clerical, accounting and bookkeeping services, and certain other services required by the Fund. In addition, PFPC has agreed to prepare and file various reports with the appropriate regulatory agencies and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund. For its services to the Fund, PFPC is entitled to receive a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis. PFPC is currently waiving one-half of its minimum annual fee.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ------------------- ------- ---------------
Boston Partners
Mid Cap Value Fund
|
For the period ended August 31, 1997, the Fund paid PFPC administration fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ----------------- ------- --------------
Boston Partners $9,166 $9,167 $0
Mid Cap Value Fund
|
The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by RBB or the Fund in
connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder.
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, (the "Distribution Agreement"), entered into by the Distributor and RBB on behalf of the Institutional and Investor Classes, and Plan of Distribution, as amended, for the Investor Class (the "Plan"), which were adopted by RBB in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to solicit orders for the sale of Fund Shares. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee under the Plans, to be calculated daily and paid monthly by the Investor Class, at the annual rate set forth in the Prospectus.
For the period May 29, 1998 through August 31, 1998, the Fund paid the Distributor fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Mid Cap Value Fund
(Investor)
|
For the period September 1, 1997 through May 29, 1998, both the Institutional Class and Investor Class of the Fund paid the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), a wholly-owned subsidiary of Warburg Pincus Asset Management, Inc., with a principal business address of 466 Lexington Avenue, New York, New York 10071, distribution fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Mid Cap Value Fund
(Institutional)
Boston Partners
Mid Cap Value Fund
(Investor)
|
For the period ended August 31, 1997, the Fund paid Counsellors fees as follows:
Fees Paid
(After
waivers and
Portfolio reimbursements) Waivers Reimbursements
--------- --------------- ------- --------------
Boston Partners
Mid Cap Value Fund $161 $0 $0
(Institutional)
Boston Partners
Mid Cap Value Fund $ 77 $0 $0
(Investor)
|
On April 23, 1997, the Plan was approved by RBB's Board of Directors, including the directors who are not "interested persons" of RBB and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to the Plan ("12b-1 Directors"). RBB believes that the Plan may benefit the Fund by increasing sales of Fund shares.
Among other things, the Plan provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of RBB regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by RBB's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Fund's shares of the Investor Class under the Plan shall not be materially increased without shareholder approval; and (4) while the Plan remains in effect, the selection and nomination of RBB's directors who are not "interested persons" of RBB (as defined in the 1940 Act) shall be committed to the discretion of such directors who are not "interested persons" of RBB.
The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plan may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
Administrative Services Agent
Provident Distributors, Inc. ("PDI") provides certain administrative services to the Institutional Class of the Fund that are not provided by PFPC, pursuant to an Administrative Services Agreement, dated May 29, 1998, between RBB and PDI. These services include
furnishing data processing and clerical services, acting as liaison between the Funds and various service providers and coordinating the preparation of annual, semi-annual and quarterly reports. As compensation for such administrative services, PDI is entitled to a monthly fee calculated at the annual rate of .15% of each Fund's average daily net assets. PDI is currently waiving fees in excess of .03% of each fund's average daily net assets. For the period May 29, 1998 through August 31, 1998, the Institutional Class of the Fund paid PDI $______ in administrative services fees, and PDI waived $______.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors, Boston Partners is responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Fund. In purchasing and selling portfolio securities, Boston Partners seeks to obtain the best net price and the most favorable execution of orders. To the extent that the execution and price offered by more than one broker/dealer are comparable, the Adviser may effect transactions in portfolio securities with broker/dealers who provide research, advice or other services such as market investment literature.
For the fiscal year ended August 31, 1998, the Fund paid brokerage commissions aggregating $________.
For the fiscal year ended August 31, 1998, the Fund paid commissions in the aggregate amount of $______ to brokers on account of research services on transactions in the aggregate amount of $_______.
RBB is required to identify securities of its "regular brokers or dealers" that the Fund has acquired during the most recent fiscal period. At August 31, 1998, the Fund held the following securities of RBB's regular brokers or dealers:
[Information here]
Investment decisions for the Fund and for other investment accounts managed by Boston Partners are made independently of each other in the light of differing conditions. However, the same investment decision may be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Fund is concerned, in other cases it is believed to be beneficial to the Fund.
The Fund expects that its annual portfolio turnover rate will not exceed 100%. A high rate (100% or more) of portfolio turnover involves correspondingly greater brokerage commission expenses and other transaction costs that 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 a portfolio's annual sales or purchases of portfolio securities (exclusive of purchases or sales of securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the portfolio during the year.
PURCHASE AND REDEMPTION INFORMATION
RBB reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Fund's shares by making payment in whole or in part in securities chosen by RBB 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. RBB 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, RBB 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 the NYSE is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (RBB may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
The computation of the hypothetical offering price per share of an Institutional and Investor Share of the Fund based on the value of the Fund's net assets on August 31, 1998 and the Fund's Institutional and Investor Shares outstanding on such date is as follows:
Boston Partners Mid Cap Value Fund
Institutional Shares Investor Shares
-------------------- ---------------
Net Assets.......................................
Outstanding Shares...............................
Net Asset Value
per Share.......................................
Maximum Sales Charge............................. N/A N/A
Maximum Offering Price
to Public......................................
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VALUATION OF SHARES
The net asset values per share of each class of the Fund are calculated as of the close of the NYSE, generally 4:00 p.m. Eastern Time on each Business Day. "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 on the preceding Friday and subsequent Monday when one of these holidays falls on Saturday or Sunday. Net asset value per share, the value of an individual share in a fund, is computed by adding the value of the proportionate interest of each class in a 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 the class. The net asset values of each class are calculated independently of the other classes. Securities that are listed on stock exchanges 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 evaluation. 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 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 RBB'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.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by RBB's Board of Directors.
PERFORMANCE INFORMATION
Total Return. The Fund may from time to time advertise its "average annual total return." The Fund computes 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
1, 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.
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The Fund, when advertising its "aggregate total return," computes 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.
Calculated according to the SEC Rules, the average annual total return for the Fund was as follows:
Average
Fund Return
For the fiscal year ended August 31, 1998.
Mid Cap Value Fund - Institutional %
Mid Cap Value Fund - Investor %
For the period ended August 31, 1997.*
Mid Cap Value Fund - Institutional %
Mid Cap Value Fund - Investor %
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Calculated according to the above formula, the aggregate total return for the Fund was as follows:
Fund Aggregate
Return
For the fiscal year ended August 31, 1998.
Mid Cap Value Fund - Institutional %
Mid Cap Value Fund - Investor %
For the period ended August 31, 1997.*
Mid Cap Value Fund - Institutional %
Mid Cap Value Fund - Investor %
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*The Fund commenced operations on June 2, 1997.
Investors should note that the total return figures are based on historical earnings and are not intended to indicate future performance.
TAXES
The following is only a summary of certain additional tax considerations generally affecting the Fund and its shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning. Investors are urged to consult their tax advisers with specific reference to their own tax situation.
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 that it distributes to shareholders, provided that it distributes an amount equal to the sum of (a) at least 90% of its investment company taxable income (net taxable investment income and the excess of net short-term capital gain over net long-term capital loss, if any, for the year) and (b) at least 90% of its net tax-exempt interest income, if any, for the year (the "Distribution Requirement") and satisfies certain other requirements of the Code that are described below. Distributions of investment company taxable income made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year will satisfy the Distribution Requirement.
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").
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 Fund 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 net capital gain (excess of net long-term capital gain over net short-term capital loss), if any, for each taxable year. Such gain is distributed as a capital gain dividend and is taxable to shareholders as long-term capital gain, regardless of the length of time the shareholder has held his shares, whether such gain was recognized by the Fund prior to the date on which a shareholder acquired shares of the Fund and whether the distribution was paid in cash or reinvested in shares. The aggregate amount of distributions designated by 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 capital loss or 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 Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
In the case of corporate shareholders, distributions (other than capital gain dividends) of the Fund for any taxable year generally qualify for the dividends received deduction 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" if it has been received from a domestic corporation. Distributions of net investment income received by the Fund from investments in debt securities will be taxable to shareholders as ordinary income and will not be treated as "qualifying dividends" for purposes of the dividends received deduction. The Fund 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 Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
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.
A shareholder will recognize gain or loss upon a redemption of shares or an exchange of shares of the Fund for shares of another Boston Partners Fund upon exercise of the exchange privilege, to the extent of any difference between the price at which the shares are redeemed or exchanged and the price or prices at which the shares were originally purchased for cash.
The Code imposes a non-deductible 4% excise tax on regulated investment companies that do not distribute with respect to each calendar year an amount equal to 98% of their ordinary income for the calendar year plus 98% of their capital gain net income for the 1-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. 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 Fund will be required in certain cases to withhold and remit to the United States Treasury 31% of dividends paid to any shareholder (1) who has provided either an incorrect tax identification number or no number at all, (2) who is subject to backup withholding by the Internal Revenue Service for failure to report the receipt of interest or dividend income properly, or (3) who has failed to certify to the Fund that he is not subject to backup withholding or that he is an "exempt recipient."
The foregoing general discussion of federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Although the 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.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million
shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are
classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Classes TT and UU Common Stock constitute the Boston Partners Mid Cap Value Fund. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interest in the Money Market, Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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.
RBB does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. RBB's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of RBB 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, RBB will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of the 1940 Act or applicable state law, or otherwise, to the holders of the outstanding securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities, as defined in the 1940 Act, of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under Rule 18f-2, 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, as defined in the 1940 Act, of such portfolio. However, Rule 18f-2 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 RBB's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law, or by RBB's Articles of Incorporation, RBB 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 entitled to vote on the matter 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 RBB and the non-interested directors.
Independent Accountants. ( ), serves as RBB's independent accountants.
Control Persons. As of ________ 1998, to RBB's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of each class of RBB indicated below. See "Additional Information Concerning RBB Shares" above. RBB does not know whether such persons also beneficially own such shares.
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
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BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
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BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of RBB.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal period ended August 31, 1998 has been filed with the Securities and Exchange Commission. The financial statements in such Annual Report are incorporated herein by reference into this Statement of Additional Information. The financial statements included in the Annual Report for the Fund for the fiscal period ended August 31, 1998 have been audited by RBB's independent accountants, ( ), whose report thereon also appears and is incorporated herein by reference. No other portions of the Annual Report are incorporated herein by reference. The financial statements in such Annual Report have been incorporated herein in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. Copies of the Annual Report may be obtained by calling toll-free (800) 311-9783.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not
paid. An exception is made if there is a grace period and S&P believes
that a payment will be made, in which case the rating can be
maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is
made if S&P expects that debt service payments will continue to be
made on a specific issue. In the absence of a payment default or
bankruptcy filing, a technical default (i.e., covenant violation) is
not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not
paid. An exception is made if there is a grace period and S&P believes
that a payment will be made, in which case the rating can be
maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is
made if S&P expects that debt service payments will continue to be
made on a specific issue. In the absence of a payment default or
bankruptcy filing, a technical default (i.e., covenant violation) is
not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BOSTON PARTNERS BOND FUND
(Institutional and Investor Classes)
of
The RBB Fund, Inc.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of the Investor and Institutional Classes (the "Shares") representing interests in the Boston Partners Bond Fund (the "Fund") of The RBB Fund, Inc. ("RBB"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Boston Partners Bond Fund Prospectuses, dated __________, 1998 (together, the "Prospectuses"). A copy of any of the Prospectuses may be obtained from RBB by calling toll-free (800) 311-9783 or 9829. This Statement of Additional Information is dated _________, 1998.
CONTENTS
Institutional Investor
Prospectus Prospectus
Page Page Page
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General..............................................
Investment Objectives and Policies...................
Directors and Officers............................... N/A N/A
Investment Advisory, Distribution....................
And Servicing Arrangements
Portfolio Transactions...............................
Purchase and Redemption Information..................
Valuation of Shares..................................
Performance and Yield Information....................
Taxes................................................
Additional Information Concerning....................
RBB Shares
Miscellaneous........................................ N/A N/A
Financial Statements ................................ N/A N/A N/A
Appendix A........................................... A-1 N/A N/A
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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 RBB or its distributor. The Prospectus does not constitute an offering by the Fund or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. ("RBB") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. RBB was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Fund.
Additional Information on Fund Investments.
Mortgage-Related Securities. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes"), which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes"), which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
The Fund may invest in multiple class pass-through securities, including collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduit ("REMIC") pass-through or participation certificates ("REMIC Certificates"). These multiple class securities may be issued by U.S. Government agencies or instrumentalities, including
FNMA and FHLMC, or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs and REMICs are debt obligations of a legal entity that are collateralized by, and multiple class pass-through securities represent direct ownership interests in, a pool of residential mortgage loans or mortgage pass-through securities (the "Mortgage Assets"), the payments on which are used to make payments on the CMOs or multiple pass-through securities. Investors may purchase beneficial interests in REMICs, which are known as "regular" interests or "residual" interests. The Fund does not intend to purchase residual interests.
Each class of CMOs or REMIC Certificates, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Assets underlying the CMOs or REMIC Certificates may cause some or all of the classes of CMOs or REMIC Certificates to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs or REMIC Certificates on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs or REMIC Certificates in various ways. In certain structures (known as "sequential pay" CMOs or REMIC Certificates), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs or REMIC Certificates in the order of their respective final distribution dates. Thus no payment of principal will be made on any class of sequential pay CMOs or REMIC Certificates until all other classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs or REMIC Certificates include, among others, "parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or REMIC Certificates are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
A wide variety of REMIC Certificates may be issued in the parallel pay or sequential pay structures. These securities include accrual certificates (also known as "Z-Bonds"), which only accrue interest at a specified rate until all other certificates having an earlier final distribution date have been retired and are converted thereafter to an interest-paying security, and planned amortization class ("PAC") certificates, which are parallel pay REMIC Certificates that generally require that specified amounts of principal be applied on each payment date to one or more classes of REMIC Certificates (the "PAC Certificates"), even though all other principal payments and prepayments of the Mortgage Assets are then required to be applied to one or more other classes of the Certificates. The scheduled principal payments for the PAC Certificates generally have the highest priority on each payment date after interest due has been paid to all classes entitled to receive interest currently. Shortfalls, if any, are added to the amount payable on the next payment date. The PAC Certificate payment schedule is taken into account in calculating the final distribution date of each class of PAC. In order to create PAC tranches, one or more tranches generally must be created that absorb most of the volatility in the underlying Mortgage Assets. These tranches tend to have market prices and yields that are much more volatile than the PAC classes.
FNMA REMIC Certificates are issued and guaranteed as to timely distribution of principal and interest by FNMA. In addition, FNMA will be obligated to distribute on a timely basis to holders of FNMA REMIC Certificates required installments of principal and interest and
to distribute the principal balance of each class of REMIC Certificates in full, whether or not sufficient funds are otherwise available.
For FHLMC REMIC Certificates, FHLMC guarantees the timely payment of interest, and also guarantees the ultimate payment of principal as payments are required to be made on the underlying mortgage participation certificates ("PCs"). PCs represent undivided interests in specified level payment, residential mortgages or participation therein purchased by FHLMC and placed in a PC pool. With respect to principal payments on PCs, FHLMC generally guarantees ultimate collection of all principal of the related mortgage loans without offset or deduction. FHLMC also guarantees timely payment of principal on certain PCs, referred to as "Gold PCs."
Asset-Backed Securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties.
The yield characteristics of asset-backed securities differ from traditional debt securities. A major difference is that the principal amount of the obligations may be prepaid at any time because the underlying assets (i.e., loans) generally may be prepaid at any time. As a result, if an asset-backed security is purchased at a premium, a prepayment rate that is faster than expected may reduce yield to maturity, while a prepayment rate that is slower than expected may have the opposite effect of increasing yield to maturity. Conversely, if an asset-backed security is purchased at a discount, faster than expected prepayments may increase, while slower than expected prepayments may decrease, yield to maturity.
In general, the collateral supporting asset-backed securities is of shorter maturity than mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities.
Foreign Securities. The Fund may invest in securities of foreign issuers that may or may not be publicly traded in the United States. The Fund may invest, either directly, or indirectly through investments in closed-end investment companies, in securities issued by foreign companies wherever organized. The Fund may invest in Eurodollar Convertible Securities that are convertible into or exchangeable for foreign equity securities represented by listed American Depositary Receipts ("ADRs"). Interest and dividends on such Eurodollar securities are payable in U.S. dollars outside of the United States.
ADRs are receipts issued by an American bank or trust company evidencing ownership of underlying securities issued by a foreign issuer. ADRs may be listed on a national securities exchange or may trade in the over-the-counter market. ADR prices are denominated in United States dollars; the underlying security may be denominated in a foreign currency. The underlying security may be subject to foreign government taxes which would reduce the yield on such securities. The extent to which a Portfolio will be invested in foreign companies and ADRs will fluctuate from time to time within the limits stated in the Prospectus depending on the Adviser's assessment of prevailing market, economic and other conditions.
The Fund may purchase debt obligations issued or guaranteed by governments (including states, provinces or municipalities) of countries other than the United States, or by their agencies, authorities or instrumentalities. The Fund may purchase debt obligations issued or guaranteed by supranational entities organized or supported by several national governments, such as the International Bank for Reconstruction and Development (the "World Bank"), the Inter-American Development Bank, the Asian Development Bank and the European Investment Bank. The Fund may purchase debt obligations of foreign corporations or financial institutions, such as Yankee bonds (dollar-denominated bonds sold in the United States by non-U.S. issuers) and Euro bonds (bonds not issued in the country (and possibly currency of the country of the issuer).
Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although the Fund endeavors to achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers, dealers and listed companies than in the United States. Settlement mechanics (e.g., mail service between the United States and foreign countries) may be slower or less reliable than within the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities.
Foreign markets also 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. Such delays in settlement could result in temporary periods when a portion of the assets of a Portfolio is uninvested and no return is earned thereon. The inability of the Portfolios to make intended security purchases due to settlement problems could cause the Fund to miss attractive investment opportunities. Inability to dispose of Fund securities due to settlement problems could result either in losses to the Fund due to subsequent declines in value of the securities, or, if a Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth or gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.
Investments in foreign securities involve certain inherent risks, such as political or economic instability of the issuer or the country of issue, the difficulty of predicting international trade patterns and the possibility of imposition of exchange controls. Such securities may also be subject to greater fluctuations in price than securities of domestic corporations. In addition, there may be less publicly available information about a foreign company than about a domestic company. Foreign companies generally are not subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to domestic companies. Foreign brokerage commissions and custodian fees are generally higher than in the United States. With respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, or diplomatic developments which could affect investment in those countries.
Foreign Currency Exchange Transactions. In order to protect against a possible loss on investments resulting from a decline or appreciation in the value of a particular foreign currency against the U.S. dollar or another foreign currency or for other reasons, the Fund is authorized to enter into forward currency exchange contracts. These contracts involve an obligation to purchase or sell a specified currency at a future date at a price set at the time of the contract. Forward currency contracts do not eliminate fluctuations in the values of portfolio securities but rather may allow the Fund to establish a rate of exchange for a future point in time.
The Fund may enter into forward foreign currency exchange contracts in several circumstances. When entering into a contract for the purchase or sale of a security, the Fund may enter into a contract for the amount of the purchase or sale price to protect against variations, between the date the security is purchased or sold and the date on which payment is made or received, in the value of the foreign currency relative to the U.S. dollar or other foreign currency.
When the Adviser anticipates that a particular foreign currency may decline substantially relative to the U.S. dollar or other leading currencies, in order to reduce risk, the Fund may enter into a forward contract to sell, for a fixed amount, the amount of foreign currency approximating the value of some or all of the Fund's securities denominated in such foreign currency. Similarly, when the securities held by the Fund create a short position in a foreign currency, the Fund may enter into a forward contract to buy, for a fixed amount, an amount of foreign currency approximating the short position. With respect to any forward foreign currency contract, it will generally not be possible to precisely match the amount covered by that contract and the value of the securities involved due to the changes in the values of such securities resulting from market movements between the date the forward contract is entered into and the date it matures. While forward contracts may offer protection from losses resulting from declines or appreciation in the value of a particular foreign currency, they also limit potential gains which might result from changes in the value of such currency. The Fund will also incur costs in connection with forward foreign currency exchange contracts and conversions of foreign currencies and U.S. dollars. In addition, the Adviser may purchase or sell forward foreign currency exchange contracts for the Fund for non-hedging purposes when the Adviser anticipates that the foreign currency will appreciate or depreciate in value.
A separate account consisting of liquid assets, such as cash, U.S. Government securities or other liquid high grade debt obligations, equal to the amount of the Fund's assets that could be required to consummate forward contracts will be established with the Fund's Custodian except to the extent the contracts are otherwise "covered." For the purpose of determining the adequacy of the securities in the account, the deposited securities will be valued at market or fair value. If the market or fair value of such securities declines, additional cash or securities will be placed in the account daily so that the value of the account will equal the amount of such commitments by the Fund. A forward contract to sell a foreign currency is "covered" if the Fund owns the currency (or securities denominated in the currency) underlying the contract, or holds a forward contract (or call option) permitting the Fund to buy the same currency at a price no higher than the Fund's price to sell the currency. A forward contract to buy a foreign currency is "covered" if the Fund holds a forward contract (or put option) permitting the Fund to sell the same currency at a price as high as or higher than the Fund's price to buy the currency.
Indexed Securities. The Fund may invest in indexed securities whose value is linked to securities indices. Most such securities have values which rise and fall according to the change in one or more specified indices, and may have characteristics similar to direct investments in the underlying securities. The Fund does not presently intend to invest more than 5% of net assets in indexed securities.
Illiquid Securities. The Fund may not 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. 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.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain securities that are not registered under the Securities Act including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments.
SEC Rule 144A allows for a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers. The Adviser anticipates that the market for certain restricted securities such as institutional commercial paper will expand further as a result of this regulation and the development of automated systems for the trading, clearance and settlement of unregistered securities of domestic and foreign issuers, such as the PORTAL System sponsored by the National Association of Securities Dealers, Inc.
The Adviser will monitor the liquidity of restricted securities in the Fund under the supervision of the Board of Directors. In reaching liquidity decisions, the Adviser may consider, inter alia, the following factors: (1) the unregistered nature of the security; (2) the frequency of trades and quotes for the security; (3) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (4) dealer undertakings to make a market in the security; and (5) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer). The Fund does not presently intend to invest more than 5% of net assets in illiquid securities.
When-Issued Purchases and Forward Commitments. When the Fund agrees to purchase securities on a when-issued basis or enters into a forward commitment to purchase securities, the Custodian will set aside cash, U.S. government securities or other liquid assets equal to the amount of the purchase or the commitment in a separate account. The market value of the separate account will be monitored and if such market value declines, the Fund will be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of the Fund's commitments.
The Fund will make commitments to purchase securities on a when-issued basis or to purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, the Fund may dispose of or renegotiate a commitment after it is entered into, and may sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. In these cases, the Fund may realize a capital gain or loss.
The value of the securities underlying a when-issued purchase or a forward commitment to purchase securities, and any subsequent fluctuations in their value, is taken into account when determining the Fund's net asset value starting on the day that the Fund agrees to purchase the securities. The Fund does not earn interest on the securities it has committed to purchase until they are paid for and delivered on the settlement date. When the Fund makes a forward commitment to sell securities it owns, the proceeds to be received upon settlement are included in the Fund's assets, and fluctuations in the value of the underlying securities are not reflected in the Fund's net asset value as long as the commitment remains in effect.
Forward Currency Transactions. The Fund's participation in forward currency contracts will be limited to hedging involving either specific transactions or portfolio positions. Transaction hedging involves the purchase or sale of foreign currency with respect to specific receivables or payables of the Fund generally arising in connection with the purchase or sale of its portfolio securities. The purpose of transaction hedging is to "lock in" the U.S. dollar equivalent price of such specific securities. Position hedging is the sale of foreign currency with respect to portfolio security positions denominated or quoted in that currency. The Funds will not speculate in foreign currency exchange transactions. Transaction and position hedging will not be limited to an overall percentage of the Fund's assets, but will be employed as necessary to correspond to particular transactions or positions. The Fund may not hedge its currency positions to an extent greater than the aggregate market value (at the time of entering into the forward contract) of the securities held in its portfolio denominated, quoted in, or currently convertible into that particular currency. When the Fund engages in forward currency transactions, certain asset segregation requirements must be satisfied to ensure that the use of foreign currency transactions is unleveraged. When a Fund takes a long position in a forward currency contract, it must maintain a segregated account containing liquid assets equal to the purchase price of the contract, less any margin or deposit. When a Fund takes a short position in a forward currency contract, the Fund must maintain a segregated account containing liquid assets in an amount equal to the market value of the currency underlying such contract (less any margin or deposit), which amount must be at least equal to the market price at which the short position was established. Asset segregation requirements are not applicable when a Fund "covers" a forward currency position generally by entering into an offsetting position.
The transaction costs to the Fund of engaging in forward currency transactions vary with factors such as the currency involved, the length of the contract period and prevailing currency market conditions. Because currency transactions are usually conducted on a principal basis, no fees or commissions are involved. The use of forward currency contracts does not eliminate fluctuations in the underlying prices of the securities being hedged, but it does establish a rate of exchange that can be achieved in the future. Thus, although forward currency contracts used for transaction or position hedging purposes may limit the risk of loss due to an increase in the value of the hedged currency, at the same time they limit potential gain that might result were the contracts not entered into. Further, the Adviser may be incorrect in its expectations as to currency fluctuations, and the Fund may incur losses in connection with its
currency transactions that it would not otherwise incur. If a price movement in a particular currency is generally anticipated, a Fund may not be able to contract to sell or purchase that currency at an advantageous price.
At or before the maturity of a forward sale contract, the Fund may sell a portfolio security and 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 which it is obligated to deliver. If the Fund retains the portfolio security and engages in an offsetting transaction, the Fund, at the time of execution of the offsetting transaction, will incur a gain or a loss to the extent that movement has occurred in forward contract prices. Should forward prices decline during the period between a Fund's entering into a forward contract for the sale of a currency and the date it enters into an offsetting contract for the purchase of the currency, the Fund will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the Fund will suffer a loss to the extent the price of the currency it has agreed to sell is less than the price of the currency it has agreed to purchase in the offsetting contract. The foregoing principles generally apply also to forward purchase contracts.
Convertible Securities. The Fund may invest in convertible securities. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities have characteristics
similar to nonconvertible debt securities in that they ordinarily provide a
stable stream of income with generally higher yields than those of common stocks
of the same or similar issuers. Convertible securities rank senior to common
stock in a corporation's capital structure but are usually subordinated to
comparable nonconvertible securities. While no securities investment is
completely without risk, investments in convertible 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.
The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the
price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security.
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 does not presently intend to invest more than 5% of net assets in convertible securities, or securities received by the Fund upon conversion thereof.
Lending of Fund Securities. The Fund may lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 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. The Fund does not presently intend to invest more than 5% of net assets in securities lending.
Repurchase Agreements. The Fund may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. The financial institutions with whom the Fund may enter into repurchase agreements will be banks which the Adviser considers creditworthy pursuant to criteria approved by the Board of Directors and non-bank dealers of U.S. Government securities that are listed on the Federal Reserve Bank of New York's list of reporting dealers. The Adviser will consider the creditworthiness of a seller in determining whether to have the Fund enter into a repurchase agreement. The seller under a repurchase agreement will be required to maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. The Adviser will mark to market daily the value of the securities, and will, if necessary, require the seller to maintain additional securities, to ensure that the value is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
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 the securities at an agreed-upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Fund will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities,
plus accrued interest, subject to the agreement and will monitor the account to ensure that such value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase. The fund may also enter into "dollar rolls," in which it sells fixed-income securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, 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 engage in reverse repurchase or dollar roll transactions involving more than 5% of the Fund's net assets.
U.S. Government Obligations. The Fund may purchase U.S. Government agency and instrumentality obligations that are debt securities issued by U.S. Government-sponsored enterprises and federal agencies. Some obligations of agencies and instrumentalities of the U.S. Government are supported by the full faith and credit of the U.S. Government or by U.S. Treasury guarantees, such as securities of the Government National Mortgage Association and the Federal Housing Authority; others, by the ability of the issuer to borrow, provided approval is granted, from the U.S. Treasury, such as securities of the Federal Home Loan Mortgage Corporation and others, only by the credit of the agency or instrumentality issuing the obligation, such as securities of the Federal National Mortgage Association and the Federal Loan Banks.
The Fund's net assets may be invested in obligations issued or guaranteed by the U.S. Treasury or the agencies or instrumentalities of the U.S. Government, including options and futures on such obligations. The maturities of U.S. Government securities usually range from three months to thirty years. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, the Asian-American Development Bank and the Inter-American Development Bank. The Fund does not presently intend to invest more than 5% of net assets in U.S. Government obligations.
Futures Contracts and Options on Futures Contracts. To seek to increase total return, to hedge against changes in interest rates, securities prices or currency exchange rates, the Fund may purchase and sell various kinds of futures contracts, and purchase and write call and put options on any of such futures contracts. The Fund may also enter into closing purchase and sale transactions with respect to any such contracts and options. The futures contracts may be based on various securities (such as U.S. Government Securities), foreign currencies, securities indices and other financial instruments and indices. The Fund will engage in futures and related options transactions for bona fide hedging purposes as defined in regulations of the Commodity Futures Trading Commission or to seek to increase total return to the extent permitted by such regulations. The Fund may not purchase or sell futures contracts or purchase or sell related options to seek to increase total return, except for closing purchase or sale transactions, if immediately thereafter the sum of the amount of initial margin deposits and premiums paid
on the Fund's outstanding positions in futures and related options entered into for the purpose of seeking to increase total return would exceed 5% of the market value of the Fund's net assets. These transactions involve brokerage costs, require margin deposits and, in the case of contracts and options obligating the Fund to purchase securities or currencies, require the Fund to segregate and maintain cash or liquid assets with a value equal to the amount of the Fund's obligations.
While transactions in futures contracts and options on futures may reduce certain risks, such transactions themselves entail certain other risks. Thus, while the Fund may benefit from the use of futures and options on futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in a poorer overall performance than if the Fund had not entered into any futures contracts or options transactions. Because perfect correlation between a futures position and portfolio position which is intended to be protected is impossible to achieve, the desired protection may not be obtained and the Fund may be exposed to risk of loss. The loss incurred by the Fund in entering into futures contracts and in writing call options on futures is potentially unlimited and may exceed the amount of the premium received. Futures markets are highly volatile and the use of futures may increase the volatility of the Fund's net asset value. The profitability of the Fund's trading in futures to seek to increase total return depends upon the ability of the Adviser to correctly analyze the futures markets. In addition, because of the low margin deposits normally required in futures trading, a relatively small price movement in a futures contract may result in substantial losses to the Fund. Further, futures contracts and options on futures may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.
Stripped Securities. The Federal Reserve has established an investment program known as "STRIPS" or "Separate Trading of Registered Interest and Principal of Securities." The Fund may purchase securities registered under this program. This program allows the Fund to be able to have beneficial ownership of zero coupon securities recorded directly in the book-entry record-keeping system in lieu of having to hold certificates or other evidences of ownership of the underlying U.S. Treasury securities. The Treasury Department has, within the past several years, facilitated transfers of such securities by accounting separately for the beneficial ownership of particular interest coupon and principal payments on Treasury securities through the Federal Reserve book-entry record-keeping system.
In addition, the Fund may acquire U.S. Government Obligations and their unmatured interest coupons that have been separated ("stripped") by their holder, typically a custodian bank or investment brokerage firm. Having separated the interest coupons from the underlying principal of the U.S. Government Obligations, the holder will resell the stripped securities in custodial receipt programs with a number of different names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold separately from the underlying principal, which is usually sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic interest (cash) payments. The underlying U.S. Treasury bonds and notes themselves are held in book-entry form at the Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered securities which are ostensibly owned by the bearer or holder), in trust on behalf of the owners. RBB is unaware of any binding legislative, judicial or administrative authority on this issue.
Commercial Paper. The Fund may purchase commercial paper rated (at the time of purchase) "A-1" by S&P or "Prime-1" by Moody's or, when deemed advisable by the Fund's
investment adviser, issues rated "A-2" or "Prime-2" by S&P or Moody's, respectively. These rating symbols are described in Appendix "A" hereto. The Fund may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Fund's investment adviser pursuant to guidelines approved by the Fund's Board of Directors. Commercial paper issues in which the Fund may invest include securities issued by corporations without registration under the Securities Act of 1933, as amended (the "Securities Act") in reliance on the exemption from such registration afforded by Section 3(a)(3) thereof, and commercial paper issued in reliance on the so-called "private placement" exemption from registration, which is afforded by Section 4(2) of the Securities Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition under the federal securities laws in that any resale must similarly be made in an exempt transaction. Section 4(2) paper is normally resold to other institutional investors through or with the assistance of investment dealers who make a market in Section 4(2) paper, thus providing liquidity. The Fund does not presently intend to invest more than 5% of its net assets in commercial paper.
Money Market Instruments. The Fund may invest in "money market instruments," for purposes of temporary defensive measures which include, among other things, bank obligations. Bank obligations include bankers' acceptances, negotiable certificates of deposit, and non-negotiable time deposits earning a specified return and issued by a U.S. bank which is a member of the Federal Reserve System or insured by the Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"), or by a savings and loan association or savings bank which is insured by the Savings Association Insurance Fund of the FDIC. Bank obligations also include U.S. dollar-denominated obligations of foreign branches of U.S. banks and obligations of domestic branches of foreign banks. Such investments may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held in the Fund. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. The Fund will invest in obligations of domestic branches of foreign banks and foreign branches of domestic banks only when the Adviser believes that the risks associated with such investment are minimal.
Although the Fund may invest in securities denominated in foreign currencies, the Fund values its securities and other assets in U.S. dollars. As a result, the net asset value of a Fund's shares may fluctuate with U.S. dollar exchange rates as well as the price changes of the Fund's securities in the various local markets and currencies. Thus, an increase in the value of the U.S. dollar compared to the currencies in which the Fund makes its investments could reduce the effect of increases and magnify the effect of decreases in the price of the Fund's securities in their local markets. Conversely, a decrease in the value of the U.S. dollar may have the opposite effect of magnifying the effect of increases and reduces the effect of decreases in the prices of the fund's securities in foreign markets. In addition to favorable and unfavorable currency exchange rate developments, the Fund is subject to the possible imposition of exchange control regulations or freezes on convertibility of currency.
Investment Limitations.
RBB 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 Investment Company Act). The Fund may not:
1. Borrow money or issue senior securities, except that the Fund may borrow from banks 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; (For purposes of this Limitation No. 1, any collateral arrangements with respect to, if applicable, the writing of options and futures contracts, options on futures contracts, and collateral arrangements with respect to initial and variation margin are not deemed to be a pledge of assets.)
2. Issue any senior securities, except as permitted under the 1940 Act; (For purposes of Investment Limitation No. 2, neither the collateral arrangements with respect to options and futures identified in Limitation No. 1, nor the purchase or sale of futures or related options are deemed to be the issuance of senior securities.)
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 (a) in securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein or (b) in real estate investment trusts;
5. Purchase or sell commodities or commodity contracts, except that a Fund may deal in forward foreign exchange between currencies of the different countries in which it may invest and purchase and sell stock index and currency options, stock index futures, financial futures and currency futures contracts and related options on such futures;
6. Make loans, except through loans of portfolio instruments and repurchase agreements, provided that for purposes of this restriction the acquisition of bonds, debentures or other debt instruments or interests therein and investment in government obligations, loan participations and assignments, short-term commercial paper, certificates of deposit and bankers' acceptances shall not be deemed to be the making of a loan;
7. Invest 25% or more of its total assets, taken at market value at the time of each investment, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities); or
8. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase, more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of
such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
The Fund may invest in securities issued by other investment companies within the limits prescribed 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.
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.
DIRECTORS AND OFFICERS
The directors and executive officers of RBB, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Arnold M. Reichman -50* Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and
Executive Officer of Counsellors
Securities Inc.; Director/Trustee
of various investment companies
advised by Warburg Pincus Asset
Management, Inc.
Robert Sablowsky -59* Director Senior Vice President, Fahnestock Co.,
110 Wall Street Inc. (a registered broker-dealer); Prior
New York, NY 10005 to October 1996, Executive Vice
President of Gruntal & Co., Inc. (a
registered broker-dealer).
Francis J. McKay -61 Director Since 1963, Executive Vice President,
7701 Burholme Avenue Fox Chase Cancer Center (biomedical
Philadelphia, PA 19111 research and medical care).
Marvin E. Sternberg -63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies and
precision coated abrasives); since 1968,
Director and President, Mart MMM, Inc.
(formerly Montgomeryville Merchandise
Mart Inc.) and Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart, Inc.)
(shopping centers); and since 1975,
Director and Executive Vice President,
Cellucap Mfg. Co., Inc. (manufacturer of
disposable headwear).
Julian A. Brodsky -64 Director Director and Vice Chairman since 1969
1234 Market Street Comcast Corporation (cable television
16th Floor and communications); Director, Comcast
Philadelphia, PA 19107-3723 Cablevision of Philadelphia (cable
television and communications) and
Nextel (wireless communications).
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Donald van Roden -73 Director Self-employed businessman. From
1200 Old Mill Lane and Chairman of February 1980 to March 1987, Vice
Wyomissing, PA 19610 the Board Chairman, SmithKline Beecham Corporation
(pharmaceuticals); Director, AAA
Mid-Atlantic (auto service); Director,
Keystone Insurance Co.
Edward J. Roach -74 President Certified Public Accountant; Vice
Suite 100 and Chairman of the Board, Fox Chase Cancer
Bellevue Park Treasurer Center; Trustee Emeritus, Pennsylvania
Corporate Center School for the Deaf; Trustee Emeritus,
400 Bellevue Parkway Immaculata College; President or Vice
Wilmington, DE 19809 President and Treasurer of various
investment companies advised by
BlackRock Institutional Management
Corporation; Director, The Bradford
Funds, Inc.
Morgan R. Jones -59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse Child
Philadelphia, PA 19107-3496 Care Centers of America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of RBB, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 RBB 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 RBB 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 RBB.
RBB pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser of the Fund or the Distributor and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in
this capacity. Directors who are not affiliated persons of RBB and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from RBB in the following amounts:
Directors' Compensation
Pension or
Aggregate Retirement Benefits Estimated
Name of Person/ Compensation Accrued as Part of Annual Benefit
Position from Registrant Fund Expenses Upon Retirement
--------------- --------------- =================== ---------------
Julian A. Brodsky, $ N/A N/A
Director
Francis J. McKay, $ N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, $ N/A N/A
Director
Marvin E. Sternberg, $ N/A N/A
Director
Donald van Roden, $ N/A N/A
Director and Chairman
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On October 24, 1990 RBB adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which RBB 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 RBB's advisers, custodians, administrators and distributor, RBB itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to RBB. No officer, director or employee of Boston Partners Asset Management, L.P. ("Boston Partners" or the "Adviser") or the Distributor currently receives any compensation from RBB.
INVESTMENT ADVISORY, DISTRIBUTION
AND SERVICING ARRANGEMENTS
Advisory Agreement. Boston Partners renders advisory services to the Fund pursuant to an Investment Advisory Agreement dated October 16, 1996 (the "Advisory Agreement"). Boston Partners' general partner is Boston Partners, Inc.
Boston Partners has investment discretion for the Fund and will make all decisions affecting assets in the Fund under the supervision of RBB's Board of Directors and in accordance with the Fund's stated policies. Boston Partners will select investments for the Fund. For its services to the Fund, Boston Partners is entitled to receive a monthly advisory fee under
the Advisory Agreement computed at an annual rate of 0.75% of the Fund's average daily net assets.
For the period ended August 31, 1998, the Fund paid Boston Partners advisory fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Boston Partners Bond Fund
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Each class of the Fund bears its own expenses not specifically assumed by
Boston Partners. General expenses of RBB not readily identifiable as belonging
to a portfolio of RBB are allocated among all investment portfolios by or under
the direction of RBB's Board of Directors in such manner as the Board determines
to be fair and equitable. Expenses borne by a portfolio include, but are not
limited to, the following (or a portfolio's share of the following): (a) the
cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by Boston Partners; (c) any
costs, expenses or losses arising out of a liability of or claim for damages or
other relief asserted against RBB or a portfolio for violation of any law; (d)
any extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by RBB
to its directors and officers; (g) organizational costs; (h) fees to the
investment adviser and PFPC; (i) fees and expenses of officers and directors who
are not affiliated with a portfolios' investment adviser or Distributor; (j)
taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees; (o)
brokerage fees and commissions; (p) certain of the fees and expenses of
registering and qualifying the Fund and its shares for distribution under
federal and state securities laws; (q) expenses of preparing prospectuses and
statements of additional information and distributing annually to existing
shareholders that are not attributable to a particular class of shares of RBB;
(r) the expense of reports to shareholders, shareholders' meetings and proxy
solicitations that are not attributable to a particular class of shares of RBB;
(s) fidelity bond and directors' and officers' liability insurance premiums; (t)
the expense of using independent pricing services; and (u) other expenses which
are not expressly assumed by a portfolio's investment adviser under its advisory
agreement with the portfolio. Each class of the Fund pays its own distribution
fees, if applicable, and may pay a different share than other classes of other
expenses (excluding advisory and custodial fees) if those expenses are actually
incurred in a different amount by such class or if it receives different
services.
Under the Advisory Agreement, Boston Partners will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or RBB in connection with the performance of the Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of Boston Partners in the performance of its respective duties or from reckless disregard of its duties and obligations thereunder.
The Advisory Agreement was most recently approved on July 29, 1998 by vote of RBB'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 initial shareholder of each class of the Fund. The Advisory Agreement is terminable by vote of RBB'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 Boston Partners. The Advisory Agreement may also be terminated by Boston Partners on 60 days' written notice to RBB. The Advisory Agreement terminates automatically in the event of its assignment.
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the 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 RBB's Board of Directors concerning the Fund's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all of its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PNC Bank receives a fee, which is calculated based upon the Fund's average daily gross assets as follows: $.18 per $1,000 on the first $100 million of average daily gross assets; $.15 per $1,000 on the next $400 million of average daily gross assets; $.125 per $1,000 on the next $500 million of average daily gross assets; and $.10 per $1,000 on average daily gross assets over $1 billion, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
PFPC Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement dated November 5, 1991, as supplemented (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of the Fund, (b) addresses and mails all communications by the Fund to record owners of the Shares, 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 RBB's Board of Directors concerning the operations of the Fund. PFPC may, on 30 days' notice to RBB, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp. For its services to the Fund, under the Transfer Agency Agreement, PFPC receives a fee at the annual rate of $12 per account in the Fund, exclusive of out-of-pocket expenses, and also receives reimbursement of its out-of-pocket expenses.
Administration Agreement. PFPC serves as administrator to the Fund pursuant to an Administration and Accounting Services Agreement dated October 16, 1996, (the "Administration Agreement"). PFPC has agreed to furnish to the Fund statistical and research data, clerical, accounting and bookkeeping services, and certain other services required by the Fund. In addition, PFPC has agreed to prepare and file various reports with the appropriate regulatory agencies and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund. For its services to the Fund, PFPC is entitled to receive a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis. PFPC is currently waiving one-half of its minimum annual fee.
For the period ended August 31, 1998, the Fund paid PFPC administration fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Boston Partners Bond Fund
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The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by RBB or the Fund in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder.
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, (the "Distribution Agreement"), entered into by the Distributor and RBB on behalf of the Institutional and Investor Classes, and a Plan of Distribution, as amended, for the Investor Class (the "Plan"), which were adopted by RBB in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to solicit orders for the sale of Fund Shares. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee under the Plan, to be calculated daily and paid monthly by the Investor Class, at the annual rate set forth in the Prospectus.
For the period May 29, 1998 through August 31, 1998, the Fund paid the Distributor fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Boston Partners
Bond Fund
(Investor)
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For the period December 30, 1997 (commencement of operations) through May 29, 1998, both the Institutional Class and Investor Class of the Fund paid the Fund's previous distributor, Counsellors Securities, Inc. ("Counsellors"), a wholly-owned subsidiary of Warburg Pincus Asset Management, Inc., with a principal business address of 466 Lexington Avenue, New York, New York 10071, distribution fees as follows:
Fees Paid
(After
waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- --------------- ------- --------------
Boston Partners
Bond Fund
(Institutional)
Boston Partners
Bond Fund
(Investor)
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The amounts retained by Counsellors and PDI were used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that such Plans may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, directors of RBB, had an indirect interest in the operation of the Plans by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
Administrative Services Agent
Provident Distributors, Inc. ("PDI") provides certain administrative services to the Institutional Class of the Fund that are not provided by PFPC, pursuant to an Administrative Services Agreement, dated May 29, 1998, between RBB and PDI. These services include furnishing data processing and clerical services, acting as liaison between the Funds and various service providers and coordinating the preparation of annual, semi-annual and quarterly reports. As compensation for such administrative services, PDI is entitled to a monthly fee calculated at the annual rate of .15% of each Fund's average daily net assets. PDI is currently waiving fees in excess of .03% of each fund's average daily net assets. For the period May 29, 1998 through August 31, 1998, the Institutional Class of the Fund paid PDI $______ in administrative services fees, and PDI waived $______.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors, Boston Partners is responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Fund. In purchasing or selling portfolio securities, Boston Partners will seek to obtain the best net price and the most favorable execution of orders. To the extent that the execution and price offered by more than one broker/dealer are comparable, the Adviser may effect transactions in portfolio securities with broker/dealers who provide research, advice or other services such as market investment literature.
For the fiscal year ended August 31, 1998, the Fund paid brokerage commissions aggregating $________.
For the fiscal year ended August 31, 1998, the Fund paid commissions in the aggregate amount of $______ to brokers on account of research services on transactions in the aggregate amount of $_________.
RBB is required to identify securities of its "regular brokers or dealers" that the Fund has acquired during the most recent fiscal period. At August 31, 1998, the Fund held the following securities of RBB's regular brokers or dealers:
[Information here]
Investment decisions for the Fund and for other investment accounts managed by Boston Partners are made independently of each other in the light of differing conditions. However, the same investment decision may be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Fund is concerned, in other cases it is believed to be beneficial to the Fund.
The Fund expects that its annual portfolio turnover rate will not exceed 100%. A high rate (100% or more) of portfolio turnover involves correspondingly greater brokerage commission expenses and other transaction costs that 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 a portfolio's annual sales or purchases of portfolio securities (exclusive of purchases or sales of securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the portfolio during the year.
PURCHASE AND REDEMPTION INFORMATION
RBB reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Fund's shares by making payment in whole or in part in securities chosen by RBB 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. RBB 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, RBB 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 the NYSE is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (RBB may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
The computation of the hypothetical offering price per share of an Institutional and Investor Share of the Fund based on the value of the Fund's net assets on August 31, 1998 and the Fund's Institutional and Investor Shares outstanding on such date is as follows:
Boston Partners Bond Fund
Institutional Shares Investor Shares
Net Assets.......................... $ $
Outstanding Shares..................
Net Asset Value per Share........... $ $
Maximum Sales Charge................ N/A N/A
Maximum Offering Price to Public.... $ $
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VALUATION OF SHARES
The net asset values per share of each class of the Fund are calculated as of the close of the NYSE, generally 4:00 p.m. Eastern Time on each Business Day. "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 on the preceding Friday or subsequent Monday when one of these holidays falls on a Saturday or Sunday. Net asset value per share, the value of an individual share in a fund, is computed by adding the value of the proportionate interest of each class in a 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 the class. The net asset values of each class are calculated independently of the other classes. Securities that are listed on stock exchanges 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 evaluation. 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 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 RBB'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.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by RBB's Board of Directors.
PERFORMANCE INFORMATION
Total Return. The Fund may from time to time advertise its "average annual total return." The Fund computes 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 1, 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.
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The Fund when advertising its "aggregate total return" computes 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.
Calculated according to the SEC Rules, the average annual total return for the Fund was as follows:
Average
Fund Return
---- -------
For the fiscal year ended August 31, 1998.
Bond Fund - Institutional %
Bond Fund - Investor %
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For the period ended August 31, 1997.* Bond Fund - Institutional % Bond Fund - Investor % |
Calculated according to the above formula, the aggregate total return for the Fund was as follows:
Average
Fund Return
---- -------
For the fiscal year ended August 31, 1998.
Bond Fund - Institutional %
Bond Fund - Investor %
For the period ended August 31, 1997.*
Bond Fund - Institutional %
Bond - Investor %
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*The Institutional Class commenced operations on January 2, 1997 and the Investor Class commenced operations on January 16, 1997.
Investors should note that the total return figures are based on historical earnings and are not intended to indicate future performance.
TAXES
The following is only a summary of certain additional tax considerations generally affecting the Fund and its shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning. Investors are urged to consult their tax advisers with specific reference to their own tax situation.
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 that it distributes to shareholders, provided that it distributes an amount equal to the sum of (a) at least 90% of its investment company taxable income (net taxable investment income and the excess of net short-term capital gain over net long-term capital loss, if any, for the year) and (b) at least 90% of its net tax-exempt interest income, if any, for the year (the "Distribution Requirement") and satisfies certain other requirements of the Code that are described below. Distributions of investment company taxable income made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year will satisfy the Distribution Requirement.
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").
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 Fund 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 net capital gain (excess of net long-term capital gain over net short-term capital loss), if any, for each taxable year. Such gain is distributed as a capital gain dividend and is taxable to shareholders as long-term capital gain, regardless of the length of time the shareholder has held his shares, whether such gain was recognized by the Fund prior to the date on which a shareholder acquired shares of the Fund and whether the distribution was paid in cash or reinvested in shares. The aggregate amount of distributions designated by 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 capital loss or 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 Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
In the case of corporate shareholders, distributions (other than capital gain dividends) of the Fund for any taxable year generally qualify for the dividends received deduction 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" if it has been received from a domestic corporation. Distributions of net investment income received by the Fund from investments in debt securities will be taxable to shareholders as ordinary income and will not be treated as "qualifying dividends" for purposes of the dividends received deduction. The Fund 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 Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
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.
A shareholder will recognize gain or loss upon a redemption of shares or an exchange of shares of the Fund for shares of another Boston Partners Fund upon exercise of the exchange privilege, to the extent of any difference between the price at which the shares are redeemed or exchanged and the price or prices at which the shares were originally purchased for cash.
The Code imposes a non-deductible 4% excise tax on regulated investment companies that do not distribute with respect to each calendar year an amount equal to 98% of their ordinary income for the calendar year plus 98% of their capital gain net income for the 1-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. 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 Fund will be required in certain cases to withhold and remit to the United States Treasury 31% of dividends paid to any shareholder (1) who has provided either an incorrect tax identification number or no number at all, (2) who is subject to backup withholding by the Internal Revenue Service for failure to report the receipt of interest or dividend income properly, or (3) who has failed to certify to the Fund that he is not subject to backup withholding or that he is an "exempt recipient."
The foregoing general discussion of federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Although the 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.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100
million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Classes VV and WW Common Stock constitute the Boston Partners Bond Fund. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interest in the Money Market, Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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.
RBB does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. RBB's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of RBB 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, RBB will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of the 1940 Act or applicable state law, or otherwise, to the holders of the outstanding securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities, as defined in the 1940 Act, of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under Rule 18f-2, 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, as defined in the 1940 Act, of such portfolio. However, Rule 18f-2 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 RBB's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law or by RBB's Articles of Incorporation, RBB 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 entitled to vote on the matter 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 RBB.
Independent Accountants. ( ), serves as RBB's independent accountants.
Control Persons. As of ________, 1998 to RBB's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of each class of RBB indicated below. See "Additional Information Concerning RBB Shares" above. RBB does not know whether such persons also beneficially own such shares.
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
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BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
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BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of RBB.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal period ended August 31, 1998 has been filed with the Securities and Exchange Commission. The financial statements in such Annual Report are incorporated herein by reference into this Statement of Additional Information. The financial statements included in the Annual Report for the Fund for the fiscal period ended August 31, 1998 have been audited by RBB's independent accountants, ( ), whose report thereon also appears and is incorporated herein by reference. No other portions of the Annual Report are incorporated herein by reference. The financial statements in such Annual Report have been incorporated herein in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. Copies of the Annual Report may be obtained by calling toll-free (800) 311-9783.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BOSTON PARTNERS MICRO CAP VALUE FUND
(Institutional and Investor Classes)
of
The RBB Fund, Inc.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of the Investor and Institutional Classes (the "Shares") representing interests in the Boston Partners Micro Cap Value Fund (the "Fund") of The RBB Fund, Inc. ("RBB"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Boston Partners Micro Cap Value Fund Prospectuses, dated __________, 1998 (together, the "Prospectus"). A copy of any of the Prospectuses may be obtained from RBB by calling toll-free (800) 311-9783 or 9829. This Statement of Additional Information is dated ______________, 1998.
CONTENTS
Institutional Investor
Prospectus Prospectus
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General............................................................
Investment Objectives and Policies.................................
Directors and Officers............................................. N/A N/A
Investment Advisory, Distribution
and Servicing Arrangements.......................................
Portfolio Transactions............................................. N/A N/A
Purchase and Redemption Information................................
Valuation of Shares................................................
Performance and Yield Information..................................
Taxes..............................................................
Additional Information Concerning
RBB Shares......................................................
Miscellaneous...................................................... N/A N/A
Financial Statements............................................... N/A N/A N/A
Appendix A......................................................... A-1 N/A N/A
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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 RBB or its distributor. The Prospectus does not constitute an offering by the
Fund or by the distributor in any jurisdiction in which such offering may not
lawfully be made.
GENERAL
The RBB Fund, Inc. ("RBB") is an open-end management investment company currently operating or proposing to operate _____________ separate investment portfolios. RBB was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Fund.
Additional Information on Fund Investments.
Lending of Fund Securities. The Fund may lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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.
Indexed Securities. The Fund may invest in indexed securities whose value is linked to securities indices. Most such securities have values which rise and fall according to the change in one or more specified indices, and may have characteristics similar to direct investments in the underlying securities. The Fund does not presently intend to invest more than 5% of net assets in indexed securities.
Repurchase Agreements. The Fund may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The securities held subject to a repurchase agreement may have stated maturities exceeding 13 months, provided the repurchase agreement itself matures in less than 13 months. The financial institutions with whom the Fund may enter into repurchase agreements will be banks which the Adviser considers creditworthy pursuant to criteria approved by the Board of Directors and non-bank dealers of U.S. Government securities that are listed on the Federal Reserve Bank of New York's list of reporting dealers. The Adviser will consider the creditworthiness of a seller in determining whether to have the Fund enter into a repurchase agreement. The seller under a repurchase agreement will be required to maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. The Adviser will mark to market daily the value of the securities, and will, if necessary, require
the seller to maintain additional securities, to ensure that the value is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying obligations.
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 the securities at an agreed-upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940 (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Fund will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement and will monitor the account to ensure that such value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase. The Fund may also enter into "dollar rolls," in which it sells fixed income securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, 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 engage in reverse repurchase or dollar roll transactions involving more than 5% of the Fund's net assets.
U.S. Government Obligations. The Fund may purchase U.S. Government agency and instrumentality obligations that are debt securities issued by U.S. Government-sponsored enterprises and federal agencies. Some obligations of agencies and instrumentalities of the U.S. Government are supported by the full faith and credit of the U.S. Government or by U.S. Treasury guarantees, such as securities of the Government National Mortgage Association and the Federal Housing Authority; others, by the ability of the issuer to borrow, provided approval is granted, from the U.S. Treasury, such as securities of the Federal Home Loan Mortgage Corporation and others, only by the credit of the agency or instrumentality issuing the obligation, such as securities of the Federal National Mortgage Association and the Federal Loan Banks.
The Fund's net assets may be invested in obligations issued or guaranteed by the U.S. Treasury or the agencies or instrumentalities of the U.S. Government, including options and futures on such obligations. The maturities of U.S. Government securities usually range from three months to thirty years. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage
Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, the Asian-American Development Bank and the Inter-American Development Bank. The Fund does not presently intend to invest more than 5% of net assets in U.S. Government obligations.
Illiquid Securities. The Fund may not invest more than 15% of its net assets in illiquid securities (including repurchase agreements that have a maturity of longer than seven days), including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. 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.
The Fund may purchase securities which are not registered under the Securities Act but which may 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 Fund's adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in a Fund during any period that qualified institutional buyers become uninterested in purchasing restricted 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).
Hedging Investments. At such times as the Adviser deems it appropriate and consistent with the investment objective of the Fund, the Fund may invest in financial futures contracts and options on financial futures contracts. The purpose of such transactions is to hedge against changes in the market value of securities in the Fund caused by fluctuating interest rates and to close out or offset its existing positions in such futures contracts or options as described
below. Such instruments will not be used for speculation. Futures contracts and options on futures are discussed below.
Futures Contracts. The Fund may invest in financial futures contracts with respect to those securities listed on the S & P 500 Stock Index. Financial futures contracts obligate the seller to deliver a specific type of security called for in the contract, at a specified future time, and for a specified price. Financial futures contracts may be satisfied by actual delivery of the securities or, more typically, by entering into an offsetting transaction. There are risks that are associated with the use of futures contracts for hedging purposes. In certain market conditions, as in a rising interest rate environment, sales of futures contracts may not completely offset a decline in value of the portfolio securities against which the futures contracts are being sold. In the futures market, it may not always be possible to execute a buy or sell order at the desired price, or to close out an open position due to market conditions, limits on open positions, and/or daily price fluctuations. Risks in the use of futures contracts also result from the possibility that changes in the market interest rates may differ substantially from the changes anticipated by the Fund's investment adviser when hedge positions were established. The Fund does not presently intend to invest more than 5% of net assets in futures contracts.
Options on Futures. The Fund may purchase and write call and put options on futures contracts with respect to those securities listed on the S & P 500 Stock Index and enter into closing transactions with respect to such options to terminate an existing position. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract. The Fund may use options on futures contracts in connection with hedging strategies. The purchase of put options on futures contracts is a means of hedging against the risk of rising interest rates. The purchase of call options on futures contracts is a means of hedging against a market advance when the Fund is not fully invested.
There is no assurance that the Fund will be able to close out its financial futures positions at any time, in which case it would be required to maintain the margin deposits on the contract. There can be no assurance that hedging transactions will be successful, as there may be imperfect correlations (or no correlations) between movements in the prices of the futures contracts and of the securities being hedged, or price distortions due to market conditions in the futures markets. Such imperfect correlations could have an impact on the Fund's ability to effectively hedge its securities. The Fund does not presently intend to invest more than 5% of net assets in options on futures.
Bank and Corporate Obligations. The Fund may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits issued by U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. Investment in obligations of foreign banks or foreign branches of U.S. banks may entail risks that are different from those of investments in obligations of U.S. banks due to differences in political, regulatory and economic systems and conditions. The Fund may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
The Fund may invest in debt obligations, such as bonds and debentures, issued by corporations and other business organizations that are rated at the time of purchase within the three highest ratings categories of S&P or Moody's (or which, if unrated, are determined by the Adviser to be of comparable quality). Unrated securities will be determined to be of the comparable quality to rated debt obligations if, among other things, other outstanding obligations of the issuers of such securities are rated A or better. See Appendix "A" for a description of corporate debt ratings.
Commercial Paper. The Fund may purchase commercial paper rated (at the time of purchase) "A-1" by S&P or "Prime-1" by Moody's or, when deemed advisable by the Fund's investment adviser, issues rated "A-2" or "Prime-2" by S&P or Moody's, respectively. These rating symbols are described in Appendix "A" hereto. The Fund may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Fund's investment adviser pursuant to guidelines approved by the Fund's Board of Directors. Commercial paper issues in which the Fund may invest include securities issued by corporations without registration under the Securities Act of 1933, as amended (the "Securities Act") in reliance on the exemption from such registration afforded by Section 3(a)(3) thereof, and commercial paper issued in reliance on the so-called "private placement" exemption from registration, which is afforded by Section 4(2) of the Securities Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition under the federal securities laws in that any resale must similarly be made in an exempt transaction. Section 4(2) paper is normally resold to other institutional investors through or with the assistance of investment dealers who make a market in Section 4(2) paper, thus providing liquidity. The Fund does not presently intend to invest more than 5% of its net assets in commercial paper.
Foreign Securities. The Fund may invest in foreign securities, either directly or indirectly through American Depository Receipts and European Depository Receipts. Investments in foreign securities involve higher costs than investments in U.S. securities, including higher transaction costs as well as the imposition of additional taxes by foreign governments. In addition, foreign investments may include additional risks associated with currency exchange rates, less complete financial information about the issuers, less market liquidity and political stability. Future political and economic information, the possible imposition of withholding taxes on interest income, the possible seizure or nationalization of foreign holdings, the possible establishment of exchange controls, or the adoption of other governmental restrictions, might adversely affect the payment of principal and interest on foreign obligations.
Although the Fund may invest in securities denominated in foreign currencies, the Fund values its securities and other assets in U.S. dollars. As a result, the net asset value of a Fund's shares may fluctuate with U.S. dollar exchange rates as well as the price changes of the Fund's securities in the various local markets and currencies. Thus, an increase in the value of the U.S. dollar compared to the currencies in which the Fund makes its investments could reduce the effect of increases and magnify the effect of decreases in the price of the Fund's securities in their local markets. Conversely, a decrease in the value of the U.S. dollar may have the opposite effect of magnifying the effect of increases and reducing the effect of decreases in the prices of the Fund's securities in its foreign markets. In addition to favorable and unfavorable currency
exchange rate developments, the Fund is subject to the possible imposition of exchange control regulations or freezes on convertibility of currency.
Investment Limitations.
RBB 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 or issue senior securities, except that the Fund may borrow from banks 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; (For purposes of this Limitation No. 1, any collateral arrangements with respect to, if applicable, the writing of options and futures contracts, options on futures contracts, and collateral arrangements with respect to initial and variation margin are not deemed to be a pledge of assets.)
2. Issue any senior securities, except as permitted under the 1940 Act; (For purposes of this Limitation No. 2, neither the collateral arrangements with respect to options and futures identified in Limitation No. 1, nor the purchase or sale of futures or related options are deemed to be the issuance of senior securities.)
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 (a) in securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein or (b) in real estate investment trusts;
5. Purchase or sell commodities or commodity contracts, except that a Fund may deal in forward foreign exchanges 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;
7. Invest 25% or more of its assets, taken at market value at the time of each investment, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities); or
8. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase, more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
The Fund may invest in securities issued by other investment companies within the limits prescribed 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.
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.
DIRECTORS AND OFFICERS
The directors and executive officers of RBB, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
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*Arnold M. Reichman -50 Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and
Executive Officer of Counsellors
Securities Inc.; Director/Trustee
of various investment companies
advised by Warburg Pincus Asset
Management, Inc.
*Robert Sablowsky -59 Director Senior Vice President, Fahnestock Co.,
110 Wall Street Inc. (a registered broker-dealer); Prior
New York, NY 10005 to October 1996, Executive Vice
President of Gruntal & Co., Inc. (a
registered broker-dealer).
Francis J. McKay -61 Director Since 1963, Executive Vice President,
7701 Burholme Avenue Fox Chase Cancer Center (biomedical
Philadelphia, PA 19111 research and medical care).
Marvin E. Sternberg -63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies and
precision coated abrasives); since 1968,
Director and President, Mart MMM, Inc.
(formerly Montgomeryville Merchandise
Mart Inc.) and Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart, Inc.)
(shopping centers); and since 1975,
Director and Executive Vice President,
Cellucap Mfg. Co., Inc. (manufacturer of
disposable headwear).
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Julian A. Brodsky -64 Director Director and Vice Chairman since 1969
1234 Market Street Comcast Corporation (cable television
16th Floor and communications); Director Comcast
Philadelphia, PA 19107-3723 Cablevision of Philadelphia (cable
television and communications) and
Nextel (wireless communications).
Donald van Roden -73 Director Self-employed businessman. From
1200 Old Mill Lane and Chairman of February 1980 to March 1987, Vice
Wyomissing, PA 19610 the Board Chairman, SmithKline Beecham Corporation
(pharmaceuticals); Director, AAA
Mid-Atlantic (auto service); Director,
Keystone Insurance Co.
Edward J. Roach -74 President Certified Public Accountant; Vice
Suite 100 and Chairman of the Board, Fox Chase Cancer
Bellevue Park Treasurer Center; Trustee Emeritus, Pennsylvania
Corporate Center School for the Deaf; Trustee Emeritus,
400 Bellevue Parkway Immaculata College; President or Vice
Wilmington, DE 19809 President and Treasurer of various
investment companies advised by
BlackRock Institutional Management
Corporation; Director, The Bradford
Funds, Inc.
Morgan R. Jones -59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse
Philadelphia, PA 19107-3496 Child Care Centers of America, Inc.
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of RBB, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each 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 RBB 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 RBB 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 RBB.
RBB pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of any investment adviser of the Fund or the Distributor and Mr. Sablowsky, who is considered to be an affiliated person, $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. Directors who are not affiliated persons of RBB and Mr. Sablowsky are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1998, each of the following members of the Board of Directors received compensation from RBB in the following amounts:
Pension or
Retirement
Benefits
Aggregate Accrued as Estimated Annual
Name of Person/ Compensation Part of Fund Benefits Upon
Position from Registrant Expenses Retirement
--------------- --------------- ------------ ----------------
Julian A. Brodsky, N/A N/A
Director
Francis J. McKay, N/A N/A
Director
Arnold M. Reichman, N/A N/A
Director
Robert Sablowsky, N/A N/A
Director
Marvin E. Sternberg, N/A N/A
Director
Donald van Roden, N/A N/A
Director and Chairman
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On October 24, 1990 RBB adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which RBB 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 RBB's advisers, custodians, administrators and distributor, RBB itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to RBB. No officer, director or employee of Boston
Partners Asset Management, L.P. ("Boston Partners" or the "Adviser") or the Distributor currently receives any compensation from RBB.
INVESTMENT ADVISORY, DISTRIBUTION
AND SERVICING ARRANGEMENTS
Advisory Agreement. Boston Partners renders advisory services to the Fund pursuant to an Investment Advisory Agreement dated July 1, 1998 (the "Advisory Agreement"). Boston Partners' general partner is Boston Partners, Inc.
Boston Partners has investment discretion for the Fund and will make all decisions affecting assets in the Fund under the supervision of RBB's Board of Directors and in accordance with the Fund's stated policies. Boston Partners will select investments for the Fund. For its services to the Fund, Boston Partners is entitled to receive a monthly advisory fee under the Advisory Agreement computed at an annual rate of 1.25% of the Fund's average daily net assets. Boston Partners is currently waiving advisory fees in excess of 0.00% of average daily net assets.
For the fiscal year ended August 31, 1998, the Fund paid Boston Partners advisory fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
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Boston Partners
Micro Cap Value
Fund
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Each class of the Fund bears its own expenses not specifically assumed by Boston Partners. General expenses of RBB not readily identifiable as belonging to a portfolio of RBB are allocated among all investment portfolios by or under the direction of RBB's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of a portfolio by Boston Partners; (c) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against RBB or a portfolio for violation of any law; (d) any extraordinary expenses; (e) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (f) the cost of investment company literature and other publications provided by RBB to its directors and officers; (g) organizational costs; (h) fees to the investment adviser and PFPC; (i) fees and expenses of officers and directors who are not affiliated with a portfolios' investment adviser or Distributor; (j) taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees; (o) brokerage fees and
commissions; (p) certain of the fees and expenses of registering and qualifying the Fund and its shares for distribution under federal and state securities laws; (q) expenses of preparing prospectuses and statements of additional information and distributing annually to existing shareholders that are not attributable to a particular class of shares of RBB; (r) the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of RBB; (s) fidelity bond and directors' and officers' liability insurance premiums; (t) the expense of using independent pricing services; and (u) other expenses which are not expressly assumed by a portfolio's investment adviser under its advisory agreement with the portfolio. Each class of the Fund pays its own distribution fees, if applicable, and may pay a different share than other classes of other expenses (excluding advisory and custodial fees) if those expenses are actually incurred in a different amount by such class or if it receives different services.
Under the Advisory Agreement, Boston Partners will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or RBB in connection with the performance of the Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of Boston Partners in the performance of its duties or from reckless disregard of its duties and obligations thereunder.
The Advisory Agreement was most recently approved on July 29, 1998 by vote of RBB'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 initial shareholder of each class of the Fund. The Advisory Agreement is terminable by vote of RBB'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 Boston Partners. The Advisory Agreement may also be terminated by Boston Partners on 60 days' written notice to RBB. The Advisory Agreement terminates automatically in the event of its assignment.
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Fund's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the 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 RBB's Board of Directors concerning the Fund's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible for the performance of all of its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian.
PFPC Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement dated November 5, 1991, as supplemented (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of the Fund, (b) addresses and mails all communications by the Fund to record owners of the Shares, 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 RBB's Board of Directors concerning the operations of the Fund. PFPC may, on 30 days' notice to RBB, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp.
Administration Agreement. PFPC serves as administrator to the Fund pursuant to an Administration and Accounting Services Agreement dated July 1, 1998, (the "Administration Agreement"). PFPC has agreed to furnish to the Fund statistical and research data, clerical, accounting and bookkeeping services, and certain other services required by the Fund. In addition, PFPC has agreed to, among other things, prepare and file (or assist in the preparation of) certain reports with the SEC and other regulatory agencies. For its services to the Fund, PFPC is entitled to receive a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis. PFPC is currently waiving one-half of its minimum annual fee.
The Administration Agreement provides that PFPC shall be obligated to exercise care and diligence in the performance of its duties under the Administration Agreement, to act in good faith and to use its best efforts, within reasonable limits, in performing services. PFPC shall be responsible for failure to perform its duties under the Administration Agreement arising out of PFPC's gross negligence.
For the period ended August 31, 1998, the Fund paid PFPC administration fees as follows:
Fees Paid
(After waivers and
Portfolios reimbursements) Waivers Reimbursements
---------- ----------------- ------- --------------
Boston Partners
Micro Cap Value Fund
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Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998, (the "Distribution Agreement"), entered into by the Distributor and RBB on behalf of the Institutional and Investor Classes, and a Plan of Distribution, as amended, for the Investor Class (the "Plan"), which was adopted by RBB in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to solicit orders for the sale of Fund Shares. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee under the Plan, to be calculated daily and paid monthly by the Investor Class at the annual rate set forth in the Prospectus.
On April 29, 1998, the Plan was approved by RBB's Board of Directors, including the directors who are not "interested persons" of RBB and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to the Plan ("12b-1 Directors"). RBB believes that the Plan may benefit the Fund by increasing sales of Fund shares.
Among other things, the Plan provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of RBB regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by a majority of RBB's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the compensation payable to the Distributor pursuant to the Plan shall not be materially increased without approval by a vote of at least a majority of the Fund's outstanding shares; and (4) while the Plan remains in effect, the selection and nomination of RBB's directors who are not "interested persons" of RBB (as defined in the 1940 Act) shall be committed to the discretion of such directors who are not "interested persons" of RBB.
During the period July 1, 1998 through August 31, 1998, the Fund paid distribution fees to the Distributor under the Plan for the Boston Partners Micro Cap Value Fund Investor Class in the aggregate amount of $_____. Of such amount, $_____ was paid to dealers with whom the Distributor had entered into dealer agreements, and $_____ was retained by the Distributor.
The amount retained by the Distributor was used to pay certain advertising and promotion, printing, postage, legal fees, travel, entertainment, sales, marketing and administrative expenses. The Fund believes that the Plan may benefit the Fund by increasing sales of Shares. Each of Mr. Sablowsky and Mr. Reichman, Directors of the Fund, had an indirect interest in the operation of the Plan by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities, Inc., respectively, each a broker-dealer.
Administrative Services Agent. Provident Distributors, Inc. ("PDI") provides certain administrative services to the Institutional Class of the Fund that are not provided by PFPC, pursuant to an Administrative Services Agreement, dated May 29, 1998, between RBB and PDI. These services include furnishing data processing and clerical services, acting as liaison between the Funds and various service providers and coordinating the preparation of annual, semi-annual and quarterly reports. As compensation for such administrative services, PDI is entitled to a monthly fee calculated at the annual rate of .15% of each Fund's average daily net assets. PDI is currently waiving fees in excess of .03% of each fund's average daily net assets. For the period May 29, 1998 through August 31, 1998, the Institutional Class of the Fund paid PDI $______ in administrative services fees, and PDI waived $______.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors, Boston Partners is responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Fund. In purchasing and selling portfolio securities, Boston Partners seeks to obtain the best net price and the most favorable execution of orders. To the extent that the execution and price offered by more than one broker/dealer are comparable, the Adviser may
effect transactions in portfolio securities with broker/dealers who provide research, advice or other services such as market investment literature.
Investment decisions for the Fund and for other investment accounts managed by Boston Partners are made independently of each other in the light of differing conditions. However, the same investment decision may be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Fund is concerned, in other cases it is believed to be beneficial to the Fund.
The Fund expects that its annual portfolio turnover rate will not exceed 150%. A high rate (100% or more) of portfolio turnover involves correspondingly greater brokerage commission expenses and other transaction costs that must be borne directly by the Fund, as well as the potential for increased realization of capital gains that are paid the shareholders. 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 a portfolio's annual sales or purchases of portfolio securities (exclusive of purchases or sales of securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the portfolio during the year.
PURCHASE AND REDEMPTION INFORMATION
RBB reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Fund's shares by making payment in whole or in part in securities chosen by RBB 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. RBB 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, RBB 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 the NYSE is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (RBB may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
The computation of the hypothetical offering price per share of an Institutional and Investor Share of the Fund based on the value of the Fund's net assets and number of Institutional and Investor Shares outstanding on August 31, 1998 is as follows:
Boston Partners Micro Cap Value Fund
Institutional Shares Investor Shares
-------------------- ---------------
Net Assets.......................... $ $
Outstanding Shares..................
Net Asset Value per Share.......... $ $
Maximum Sales Charge................ $ $
Maximum Offering Price
to Public......................... $ $
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VALUATION OF SHARES
The net asset values per share of each class of the Fund are calculated as of the close of the NYSE, generally 4:00 p.m. Eastern Time on each Business Day. "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 on the preceding Friday and subsequent Monday when one of these holidays falls on Saturday or Sunday. Net asset value per share, the value of an individual share in a fund, is computed by adding the value of the proportionate interest of each class in a 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 the class. The net asset values of each class are calculated independently of the other classes. Securities that are listed on stock exchanges 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 evaluation. 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 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 RBB'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.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current
payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by RBB's Board of Directors.
PERFORMANCE INFORMATION
Total Return. The Fund may from time to time advertise its "average annual total return." The Fund computes 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
T = [(-----)1/n - 1]
P
Where: T = average annual total return;
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 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.
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The Fund, when advertising its "aggregate total return," computes 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.
TAXES
The following is only a summary of certain additional tax considerations generally affecting the Fund and its shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning. Investors are urged to consult their tax advisers with specific reference to their own tax situation.
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 that it distributes to shareholders, provided that it distributes an amount equal to the sum of (a) at least 90% of its investment company taxable income (net taxable investment income and the excess of net short-term capital gain over net long-term capital loss, if any, for the year) and (b) at least 90% of its net tax-exempt interest income, if any, for the year (the "Distribution Requirement") and satisfies certain other requirements of the Code that are described below. Distributions of investment company taxable income made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year will satisfy the Distribution Requirement.
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").
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 Fund 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 net capital gain (excess of net long-term capital gain over net short-term capital loss), if any, for each taxable year. Such gain is distributed as a capital gain dividend and is taxable to shareholders as long-term capital gain regardless of the length of time the shareholder has held his shares, whether such gain was recognized by the Fund prior to the date on which a shareholder acquired shares of the Fund and whether the distribution was paid in cash or reinvested in shares. The aggregate amount of distributions designated by 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 capital loss or 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 Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
In the case of corporate shareholders, distributions (other than capital gain dividends) of the Fund for any taxable year generally qualify for the dividends received deduction 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" if it has been received from a domestic corporation. Distributions of net investment income received by the Fund from investments in debt securities will be taxable to shareholders as ordinary income and will not be treated as "qualifying dividends" for purposes of the dividends received deduction. The Fund 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 Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
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.
A shareholder will recognize gain or loss upon a redemption of shares or an exchange of shares of the Fund for shares of another Boston Partners Fund upon exercise of the exchange privilege, to the extent of any difference between the price at which the shares are redeemed or exchanged and the price or prices at which the shares were originally purchased for cash.
The Code imposes a non-deductible 4% excise tax on regulated investment companies that do not distribute with respect to each calendar year an amount equal to 98% of their ordinary income for the calendar year plus 98% of their capital gain net income for the 1-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. 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 Fund 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 properly report the receipt of interest or dividend income, or (3) who has failed to certify to the Fund that he is not subject to backup withholding or that he is an "exempt recipient."
The foregoing general discussion of federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Although the 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.
ADDITIONAL INFORMATION CONCERNING RBB SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 Money Common Stock (Government Money), 100 million shares are classified as Class Janney N.Y. Municipal Money Common Stock (N.Y. Money), 700 million shares are classified as Select Class 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), 700 million Shares are classified as Principal Class 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 Classes DDD and EEE Common Stock constitute the Boston Partners Micro Cap Fund. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represents interest in the Money Market, Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interests in five non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interests in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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.
RBB does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. RBB's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of RBB 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, RBB will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of the 1940 Act or applicable state law, or otherwise, to the holders of the outstanding securities of an investment company such as the Fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities, as defined in the 1940 Act, of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under Rule 18f-2, 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, as defined in the 1940 Act, of such portfolio. However, Rule 18f-2 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 RBB's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law, or by RBB's Articles of Incorporation, RBB 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 entitled to vote on the matter 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 RBB and the non-interested directors.
Independent Accountants. ( ), serves as RBB's independent accountants.
Control Persons. As of __________, 1998, to RBB's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of each class of RBB indicated below. See "Additional Information Concerning RBB Shares" above. RBB does not know whether such persons also beneficially own such shares.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
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BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
|
As of the same date, directors and officers as a group owned less than one percent of the shares of RBB.
Other Communications. From time to time, references to the Fund may appear in advertisements and sales literature for certain products or services offered by the Adviser, its affiliates or others, through which it is possible to invest in one or more Funds managed by the Adviser.
The Fund may also from time to time include discussions or illustrations of the effects of compounding in advertisements. "Compounding" refers to the fact that, if dividends or other distributions on a Fund investment are reinvested by being paid in additional Fund shares, any future income or capital appreciation of a Fund would increase the value, not only of the original Fund investment, but also of the additional Fund shares received through reinvestment. As a result, the value of the Fund investment would increase more quickly than if dividends or other distributions had been paid in cash.
The Fund or Adviser may also include discussions or illustrations of the potential investment goals of a prospective investor, investment management strategies, techniques, policies or investment suitability of a Fund or that employed by the Adviser (such as value investing, market timing, dollar cost averaging, asset allocation, constant ratio transfer, automatic accounting rebalancing, the advantages and disadvantages of investing in tax-deferred and taxable instruments), economic conditions, risk and volatility assessments, the relationship between sectors of the economy and the economy as a whole, various securities markets, the effects of inflation and historical performance of various asset classes, including but not limited to, stocks, bonds and Treasury bills. The Fund or Adviser may also include in such advertisements or communications additional information concerning the Adviser and/or its employees or owners, its management philosophies, operating strategies and other advisory clients, as well as statements about the Adviser attributed to others. From time to time advertisements or communications to shareholders may summarize the substance of information contained in shareholder reports (including the investment composition of the Fund), as well as the view of the Adviser or Fund as to current market, economy, trade and interest rate trends, legislative, regulatory and monetary developments, investment strategies and related matters believed to be of relevance to the Fund or an investor generally. The Fund or Adviser may also include in advertisements charts, graphs or drawings which compare the investment objective, return potential, relative stability and/or growth possibilities of the Fund and/or other mutual funds, or illustrate the potential risks and rewards of investment in various investment vehicles, including but not limited to, stocks, bonds, Treasury bills and shares of the Fund. In addition, advertisements or shareholder communications may include a discussion of certain attributes or benefits to be derived by an investment in the Fund and/or other mutual funds, shareholder profiles and hypothetical investor scenarios, timely information on financial management, tax and retirement planning and investment alternatives to certificates of deposit and other financial instruments. Such advertisements or communications may include symbols, headlines or other material which highlight or summarize the information discussed in more detail therein.
Banking Laws. Banking laws and regulations currently prohibit a bank holding company registered under the Federal Bank Holding Company Act of
1956 or any bank or non-bank affiliate thereof from sponsoring, organizing, controlling or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities, but such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, administrator, transfer agent or custodian to such an investment company, or from purchasing shares of such a company as agent for and upon the order of customers. Boston Partners Asset Management, Inc., PNC Bank and other institutions that are banks or bank affiliates are subject to such banking laws and regulations.
Boston Partners Asset Management, Inc. and PNC Bank believe they may perform the services for the Fund contemplated by their respective agreements with the Fund without violation of applicable banking laws or regulations. It should be noted, however, that there have been no cases deciding whether bank and non-bank subsidiaries of a registered bank holding company may perform services comparable to those that are to be performed by these companies, and future changes in either federal or state statutes and regulations relating to permissible activities of banks and their subsidiaries or affiliates, as well as further judicial or administrative decisions or interpretations of present and future statutes and regulations, could prevent these companies from continuing to perform such services for the Fund. If such were to occur, it is expected that the Board of Directors would recommend that the Fund enter into new agreements or would consider the possible termination of the Fund. Any new advisory agreement would normally be subject to shareholder approval. It is not anticipated that any change in the Fund's method of operations as a result of these occurrences would affect its net asset value per share or result in a financial loss to any shareholder.
Shareholder Approvals. As used in this Statement of Additional Information and in the Prospectuses, "shareholder approval" and a "majority of the outstanding shares" of a class, series or Portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the particular class, series or Portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of such class, series or Portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of such class, series or Portfolio.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Funds' Annual Report to Shareholders (the "1998 Annual Report") for the fiscal year ended August 31, 1998 are incorporated by reference into this Statement of Additional Information. No other parts of the 1998 Annual Report are incorporated by reference herein. The financial statements included in the 1998 Annual Report have been audited by RBB's independent accountants, ( ). The reports of ( ) are incorporated herein by reference, and such financial statements have been incorporated herein in reliance upon such reports given upon their authority as experts in accounting and auditing. Copies of the 1998 Annual Report may be obtained free of charge by telephoning PFPC at (800) 348-5031.
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 on the obligation 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 in higher rating categories. 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 upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
"D" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due
and is not paid. An exception is made if there is a grace
period and S&P believes that a payment will be made, in
which case the rating can be maintained; or
0 Upon voluntary bankruptcy filing or similar action. An
exception is made if S&P expects that debt service
payments will continue to be made on a specific issue. In
the absence of a payment default or bankruptcy filing, a
technical default (i.e., covenant violation) is not
sufficient for assigning a "D" rating.
|
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 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.
"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 the higher ratings.
"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 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.
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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to nonpayment 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" - An obligation rated "B" is more vulnerable to nonpayment 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.
"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, 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" - The "D" rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to "D" either:
o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or
o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a "D" rating.
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 symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are
not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.
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 risk appear somewhat larger than the "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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 operating 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: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa". The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.
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 to be 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.
"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 is the case for 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 changes in circumstances and in economic conditions are more likely to impair this capacity.
"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.
"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 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 the lowest investment-grade category and indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are 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.
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.
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. There is present 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. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
"SG" - This designation denotes speculative quality. Debt instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes.
BOSTON PARTNERS MARKET NEUTRAL FUND
BOSTON PARTNERS LONG-SHORT EQUITY FUND
(Institutional and Investor Classes)
Of
The RBB Fund, Inc.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares of the Investor and Institutional Classes (the "Shares") representing interests in the Boston Partners Market Neutral Fund (the "Market Neutral Fund") and the Boston Partners Long-Short Equity Fund (the "Long-Short Equity Fund," and, together with the Market Neutral Fund, the "Funds") of The RBB Fund, Inc. ("RBB"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Boston Partners Market Neutral Fund and Boston Partners Long-Short Equity Fund Prospectuses, dated __________, 1998 (together, the "Prospectus"). A copy of any of the Prospectuses may be obtained from RBB by calling toll-free (800) 311-9783 or 9829. This Statement of Additional Information is dated __________, 1998.
CONTENTS
Institutional Investor
Prospectus Prospectus
Page Page Page
---- ------------- -----------
General............................................................
Investment Objectives and Policies.................................
Directors and Officers.............................................
Investment Advisory, Distribution
and Servicing Arrangements.......................................
Portfolio Transactions.............................................
Purchase and Redemption Information................................
Valuation of Shares................................................
Performance and Yield Information..................................
Taxes..............................................................
Additional Information Concerning RBB Shares.......................
Miscellaneous......................................................
Financial Statements...............................................
Appendix A.........................................................
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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 RBB or its distributor. The Prospectus does not constitute an offering by the Funds or by the distributor in any jurisdiction in which such offering may not lawfully be made.
GENERAL
The RBB Fund, Inc. ("RBB") is an open-end management investment company currently operating or proposing to operate twenty-eight separate investment portfolios. RBB was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
COMMON INVESTMENT POLICIES -- MARKET NEUTRAL FUND AND LONG-SHORT EQUITY FUND
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of, and techniques used by the Funds.
Temporary Investments. The short-term and medium-term debt securities in which a Fund may invest for temporary defensive purposes consist of: (a) obligations of the United States or foreign governments, their respective agencies or instrumentalities; (b) bank deposits and bank obligations (including certificates of deposit, time deposits and bankers' acceptances) of U.S. or foreign banks denominated in any currency; (c) floating rate securities and other instruments denominated in any currency issued by international development agencies; (d) finance company and corporate commercial paper and other short-term corporate debt obligations of U.S. and foreign corporations; and (e) repurchase agreements with banks and broker-dealers with respect to such securities.
Repurchase Agreements. Each Fund may agree to purchase securities from a bank or recognized securities dealer and simultaneously commit to resell the securities to the bank or dealer at an agreed-upon date and price reflecting a market rate of interest unrelated to the coupon rate or maturity of the purchased securities ("repurchase agreements"). Such Fund would maintain custody of the underlying securities prior to their repurchase; thus, the obligation of the bank or dealer to pay the repurchase price on the date agreed to would be, in effect, secured by such securities. If the value of such securities were less than the repurchase price, plus interest, the other party to the agreement would be required to provide additional collateral so that at all times the collateral is at least equal to the repurchase price plus accrued interest. Default by or bankruptcy of a seller would expose a Fund to possible loss because of averse market action, expenses and/or delays in connection with the disposition of the underlying obligations. The financial institutions with which a 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. A 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 a 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. Each Fund may enter into reverse repurchase agreements with respect to portfolio securities for temporary purposes (such as to obtain cash to meet redemption requests when the liquidation of portfolio securities is deemed disadvantageous or inconvenient by the Adviser). Reverse repurchase agreements involve the sale of securities held by a Fund pursuant to such Fund's agreement to repurchase them at a mutually agreed upon date, price and rate of interest. At the time a Fund enters into a reverse repurchase agreement, it will establish and maintain a segregated account with an approved custodian containing cash or liquid securities having a value not less than the repurchase price (including accrued interest). The assets contained in the segregated account will be marked-to-market daily and additional assets will be placed in such account on any day in which the assets fall below the repurchase price (plus accrued interest). A Fund's liquidity and ability to manage its assets might be affected when it sets aside cash or portfolio securities to cover such commitments. Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale may decline below the price of the securities a Fund has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce a Fund's obligation to repurchase the securities, and a Fund's use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision. Reverse repurchase agreements are considered to be borrowings under the 1940 Act. The Funds do not presently intend to invest more than 5% of net assets in reverse repurchase agreements.
Illiquid Securities. Each 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, equity swaps, 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 the Adviser 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 each 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.
If otherwise consistent with their investment objectives and policies, the Funds may purchase securities that are not registered under the Securities Act but which may 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. This investment practice could have the effect of increasing the level of illiquidity in a Fund during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Adviser will monitor the liquidity of restricted securities in a Fund under the supervision of the Board of Directors. In reaching liquidity decisions, the Adviser may consider, 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. With the exception of the Long-Short Equity Fund's investments in the Market Neutral Fund, neither Fund will invest in securities of unseasoned issuers, including equity securities of unseasoned issuers which are not readily marketable, if the aggregate investment in such securities would exceed 5% of such Fund's net assets. The term "unseasoned" refers to issuers which, together with their predecessors, have been in operation for less than three years.
Lending of Portfolio Securities. To increase income on its investments, a Fund may lend its portfolio securities with an aggregate value of up to 33 1/3% of its total assets (including the loan collateral) to broker/dealers and other institutional investors. Each 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 a Fund's custodian, collateral either in cash or money market instruments, in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. Collateral for such loans may include cash, securities of the U.S. Government or its agencies or instrumentalities or an irrevocable letter of credit issued by a bank which is deemed creditworthy by the Adviser. In determining whether to lend securities to a particular broker-dealer or institutional investor, the Adviser will consider, and during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. Such loans could involve risks of delay in receiving additional collateral in the event the value of the collateral decreased below the value of the securities loaned or of delay in recovering the securities loaned or even the loss of rights in the collateral should the borrower of the securities fail financially. Default by or bankruptcy of a borrower would expose the Funds to possible loss because of adverse market action, expenses and/or delays in connection with the disposition of the underlying securities.
Borrowing. Each Fund may borrow up to 33 1/3 percent of its total assets. The Adviser intends to borrow only for temporary or emergency purposes, including to meet portfolio redemption requests so as to permit the orderly disposition of portfolio securities, or to facilitate settlement transactions on portfolio securities. Investments will not be made when borrowings exceed 5% of a Fund's total assets. Although the principal of such borrowings will be fixed, a Fund's assets may change in value during the time the borrowing is outstanding. Each Fund expects that some of its borrowings may be made on a secured basis. In such situations, either the custodian will segregate the pledged assets for the benefit of the lender or arrangements will be made with a suitable subcustodian, which may include the lender.
U.S. Government Securities. The U.S. Government securities in which a Fund may invest include direct obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and obligations issued by U.S. Government agencies and instrumentalities, including securities that are supported by the full faith and credit of the United States and securities that are supported primarily or solely by the creditworthiness of the issuer (such as securities of the Federal Home Loan Banks, the Student Loan Marketing Association and the Tennessee Valley Authority).
Options and Futures Contracts. The Funds may write covered call options, buy put options, buy call options and write put options, without limitation except as noted in this paragraph. Such options may relate to particular securities or to various indexes and may or may not be listed on a national securities exchange and issued by the Options Clearing Corporation. These Funds may also invest in futures contracts and options on futures contracts (index futures contracts or interest rate futures contracts, as applicable) for hedging purposes (including currency hedging) or for other purposes so long as aggregate initial margins and premiums required for non-hedging positions do not exceed 5% of its net assets, after taking into account any unrealized profits and losses on any such contracts it has entered into. 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. A 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 a Fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration (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 a Fund maintains with its custodian liquid assets equal to the contract value. A call option is also covered if a 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 a Fund purchases a put option, the premium paid by it is recorded as an asset of the Fund. When a 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 a 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 a 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 a 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.
Short Sales. The Market Neutral Fund will seek, and the Long-Short Equity Fund may seek, to realize additional gains through short sales. Short sales are transactions in which a Fund sells a security it does not own, in anticipation of a decline in the value of that security relative to the long positions held by the Fund. To complete such a transaction, a Fund must borrow the security to make delivery to the buyer. A Fund then is obligated to replace the security borrowed by purchasing it at the market price at or prior to the time of replacement. The price at such time may be more or less than the price at which the security was sold by a Fund. Until the security is replaced, a Fund is required to repay the lender any dividends or interest that accrue during the
period of the loan. To borrow the security, a Fund also may be required to pay a premium, which would increase the cost of the security sold. The net proceeds of the short sale will be retained by the broker (or by the Fund's custodian in a special custody account), to the extent necessary to meet margin requirements, until the short position is closed out. A Fund also will incur transaction costs in effecting short sales.
A Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. A Fund will realize a gain if the security declines in price between those dates. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of the premium, dividends, interest or expenses a Fund may be required to pay in connection with a short sale. An increase in the value of a security sold short by a Fund over the price at which it was sold short will result in a loss to the Fund, and there can be no assurance that the Fund will be able to close out the position at any particular time or at an acceptable price.
Each Fund may engage in short sales if at the time of the short sale it owns or has the right to obtain, at no additional cost, an equal amount of the security being sold short. This investment technique is known as a short sale "against the box."
European Currency Unification. Many European countries are about to adopt a single European currency, the euro. On January 1, 1999, the euro will become legal tender for all countries participating in the Economic and Monetary Union ("EMU"). A new European Central Bank will be created to manage the monetary policy of the new unified region. On the same date, the exchange rates will be irrevocably fixed between the EMU member countries. National currencies will continue to circulate until they are replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in which the Funds may invest and may result in the Funds facing additional risks in pursuing their respective investment objectives. These risks, which include, but are not limited to, uncertainty as to the proper tax treatment of the currency conversion, volatility of currency exchange rates as a result of the conversion, uncertainty as to capital market reaction, conversion costs that may affect issuer profitability and creditworthiness, and lack of participation by some European countries, may increase the volatility of each Fund's respective net asset value per share.
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.
SUPPLEMENTAL INVESTMENT POLICIES -
LONG-SHORT EQUITY FUND
S&P 500 Index Futures and Related Options. An S&P 500 Index Future contract (an "Index Future") is a contract to buy or sell an integral number of units of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index") at a specified future date at a price agreed upon when the contract is made. A unit is the value of the S&P 500 Index from time to time. Entering into a contract to buy units is commonly referred to as buying or purchasing a contract or holding a long position in the S&P 500 Index.
Index Futures can be traded through all major commodity brokers. Currently, contracts are expected to expire on the tenth day of March, June, September and December. The Long-Short Equity Fund will ordinarily be able to close open positions on the United States futures exchange on which Index Futures are then traded at any time up to and including the expiration day.
In contrast to purchases of a common stock, no price is paid or received by the Long-Short Equity Fund upon the purchase of a futures contract. Upon entering into a futures contract, the Fund will be required to deposit with its custodian in a segregated account in the name of the futures broker a specified amount of cash or securities. This is known by participants in the market as "initial margin". The type of instruments that may be deposited as initial margin, and the required amount of initial margin, are determined by the futures exchange(s) on which the Index Futures are traded. The nature of initial margin in futures transactions is different from that of margin in securities 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 S&P 500 Index fluctuates, making the position in the futures contract more or less valuable, a process known as "marking to the market". For example, when the Fund has purchased an Index Future and the price of the S&P 500 Index has risen, that position will have increased in value and the Fund will receive from the broker a variation margin payment equal to that increase in value. Conversely, when the Fund has purchased an Index Future and the price of the S&P 500 Index has declined, the position would be less valuable and the Fund would be required to make a variation margin payment to the broker. When the Fund terminates a position in a futures contract, a final determination of variation margin is made, additional cash is paid by or to the Fund, and the Fund realizes a gain or a loss.
The price of Index Futures may not correlate perfectly with movement in the underlying index due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the S&P 500 Index and futures markets. Secondly, the deposit requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than does the securities market. Increased participation by speculators in the futures market may also cause temporary price distortions.
Options on index futures contracts give the purchaser the right, in return for the premium paid, to assume a position in an index futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the holder would assume the underlying futures position and would receive a variation margin payment of cash or securities approximating the increase in the value of the holder's option position. If an option is exercised on the last trading day prior to the expiration date of the option, the settlement will be made entirely in cash based on the difference between the exercise price of the option and the closing level of the index on which the futures contract is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid.
The ability to establish and close out positions in options on futures contracts will be subject to the development and maintenance of a liquid secondary market. It is not certain that such a market will develop. Although the Long-Short Equity Fund generally will purchase only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option or at any particular time. In the event no such market exists for particular options, it might not be possible to effect closing transactions in such options, with the result that the Fund would have to exercise the options in order to realize any profit.
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 each Fund's outstanding Shares (as defined in Section 2(a)(42) of the 1940 Act). Neither Fund may:
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, provided that: (a) short sales and related borrowings of securities are not subject to this restriction; and, (b) for the purposes of this restriction, collateral arrangements with respect to options, short sales, stock index, interest rate, currency or other futures, options on futures contracts, collateral arrangements with respect to initial and variation margin and collateral arrangements with respect to swaps and other derivatives are not deemed to be a pledge or other encumbrance of assets.
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 a Fund may invest in securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein;
5. Purchase or sell commodities or commodity contracts, except that a Fund may deal in forward foreign exchange 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 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, neither Fund may:
1. Make investments for the purpose of exercising control or management, but investments by a Fund in wholly-owned investment entities created under the laws of certain countries will not be deemed the making of investments for the purpose of exercising control or management;
2. Purchase securities on margin, except for short-term credits necessary for clearance of portfolio transactions, and except that a Fund may make margin deposits in connection with its use of options, futures contracts, options on futures contracts and forward contracts;
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.
Securities held by a Fund generally may not be purchased from, sold or loaned to the Adviser or its affiliates or any of their directors, officers or employees, acting as principal, unless pursuant to a rule or exemptive order under the 1940 Act.
RISK FACTORS
Foreign Securities. Investments in foreign securities are subject to certain risks, discussed below.
Since the securities of foreign companies are frequently denominated in foreign currencies, the Funds may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, and may incur costs in connection with conversions between various currencies.
As foreign companies are not generally subject to uniform accounting, auditing and financial reporting standards and they may have policies that are not comparable to those of domestic companies, there may be less information available about certain foreign companies than about domestic companies. Securities of some foreign companies are generally less liquid and more volatile than securities of comparable domestic companies. There is generally less government supervision and regulation of stock exchanges, brokers and listed companies than in the U.S. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, political or social instability, or diplomatic developments which could affect U.S. investments in those countries.
Although the Funds will endeavor to achieve the most favorable execution costs in their portfolio transactions, fixed commissions on many foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest income. Although in some countries a portion of these taxes is recoverable, the non-recoverable portion of foreign withholding taxes will reduce the income received from the companies in which the Funds invest. However, these foreign withholding taxes are not expected to have a significant impact.
Reporting Standards. Most of the foreign securities held by the Funds will not be registered with the SEC, nor will the issuers thereof be subject to SEC or other U.S. reporting requirements. Accordingly, there will be less publicly available information concerning foreign issuers of securities held by the Fund than will be available concerning U.S. companies. Foreign companies, and in particular, companies in emerging markets, are not generally subject to uniform accounting, auditing and financial reporting standards or to other regulatory requirements comparable to those applicable to U.S. companies.
Exchange Rate Fluctuations. Because foreign securities ordinarily will be denominated in currencies other than the U.S. dollar, changes in foreign currency exchange rates will affect a Fund's net asset value, the value of interest and dividends earned, gains and losses realized on the sale of securities and net investment income and capital gain, if any, to be distributed to shareholders by a Fund. If the value of a foreign currency rises against the U.S. dollar, the value of a Fund's assets denominated in that currency will increase; conversely, if the value of a foreign currency declines against the U.S. dollar, the value of a Fund's assets denominated in that currency will decrease. The exchange rates between the U.S. dollar and other currencies are determined by supply and demand in the currency exchange markets, international balances of payments, government intervention, speculation and other economic and political conditions.
Operating Expenses. The costs attributable to foreign investing that a Fund must bear frequently are higher than those attributable to domestic investing. For example, the cost of maintaining custody of foreign securities exceeds custodian costs for domestic securities. Investment income on certain foreign securities in which a Fund may invest may be subject to foreign withholding or other taxes that could reduce the return on those securities. Tax treaties between the United States and foreign countries however, may reduce or eliminate the amount of foreign tax to which a Fund would be subject.
DIRECTORS AND OFFICERS
The directors and executive officers of RBB, their ages, business addresses and principal occupations during the past five years are:
Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
*Arnold M. Reichman -50 Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management, Inc.; Director and
Executive Officer of Counsellors
Securities Inc.; Director/Trustee of
various investment companies advised by
Warburg Pincus Asset Management, Inc.
*Robert Sablowsky -59 Director Senior Vice President, Fahnestock Co.,
110 Wall Street Inc. (a registered broker-dealer); Prior
New York, NY 10005 to October 1996, Executive Vice
President of Gruntal & Co., Inc. (a
registered broker-dealer).
Francis J. McKay -61 Director Since 1963, Executive Vice President,
7701 Burholme Avenue Fox Chase Cancer Center (biomedical
Philadelphia, PA 19111 research and medical care).
Marvin E. Sternberg -63 Director Since 1974, Chairman, Director and
937 Mt. Pleasant Road President, Moyco Industries, Inc.
Bryn Mawr, PA 19010 (manufacturer of dental supplies and
precision coated abrasives); since 1968,
Director and President, Mart MMM, Inc.
(formerly Montgomeryville Merchandise
Mart Inc.) and Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart, Inc.)
(shopping centers); and since 1975,
Director and Executive Vice President,
Cellucap Mfg. Co., Inc. (manufacturer of
disposable headwear).
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Position Principal Occupation
Name and Address and Age with Fund During Past Five Years
------------------------ --------- ----------------------
Julian A. Brodsky -64 Director Director and Vice Chairman since 1969
1234 Market Street Comcast Corporation (cable television
16th Floor and communications); Director Comcast
Philadelphia, PA 19107-3723 Cablevision of Philadelphia (cable
television and communications) and
Nextel (wireless communications).
Donald van Roden -73 Director Self-employed businessman. From
1200 Old Mill Lane and Chairman of February 1980 to March 1987, Vice
Wyomissing, PA 19610 the Board Chairman, SmithKline Beecham Corporation
(pharmaceuticals); Director, AAA
Mid-Atlantic (auto service); Director,
Keystone Insurance Co.
Edward J. Roach -74 President Certified Public Accountant; Vice
Suite 100 and Chairman of the Board, Fox Chase Cancer
Bellevue Park Treasurer Center; Trustee Emeritus, Pennsylvania
Corporate Center School for the Deaf; Trustee Emeritus,
400 Bellevue Parkway Immaculata College; President or Vice
Wilmington, DE 19809 President and
Treasurer of various investment
companies advised by PNC Institutional
Management Corporation; Director, The
Bradford Funds, Inc.
Morgan R. Jones -59 Secretary Chairman of the law firm of Drinker
Drinker Biddle & Reath LLP Biddle & Reath LLP; Director, Rocking
1345 Chestnut Street Horse Child Care Centers of America, Inc.
Philadelphia, PA 19107-3496
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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 RBB 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 RBB 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 RBB.
RBB 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 Fund 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 fee of $5,000 per year for his services in this capacity. Directors who are not affiliated persons of RBB and Mr. Sablowsky 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 RBB in the following amounts:
Directors' Compensation
Total Compensation
Pension or Compensation from
Aggregate Retirement Benefits Estimated Annual Registrant and Fund
Compensation Accrued as Part of Benefits Upon Complex(1) Paid
Name of Person/Position from Registrant Fund Expenses Retirement to Director
----------------------- --------------- ------------------ ---------------- -------------------
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
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(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 RBB adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which RBB 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 RBB's advisers, custodians, administrators and distributor, RBB itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to RBB. No officer, director or employee of Boston Partners Asset Management, L.P. ("Boston Partners" or the "Adviser") or the Distributor currently receives any compensation from RBB.
INVESTMENT ADVISORY, DISTRIBUTION
AND SERVICING ARRANGEMENTS
Advisory Agreement. Boston Partners renders advisory services to the Funds pursuant to an Investment Advisory Agreement dated ______, 1998 (the "Advisory Agreement"). Boston Partners' general partner is Boston Partners, Inc.
Boston Partners has investment discretion for the Funds and will make all decisions affecting assets in the Funds under the supervision of RBB's Board of Directors and in accordance with the Funds' stated policies. Boston Partners will select investments for the Funds. For its services to each Fund, Boston Partners is entitled to receive a monthly advisory fee under the Advisory Agreement computed at an annual rate of 2.25 % and 0.10% of the Market Neutral Fund's and the Long-Short Equity Fund's respective average daily net assets. Boston Partners is currently waiving advisory fees in excess of 1.85% and 0.00% of the Market Neutral Fund's and the Long-Short Equity Fund's respective average daily net assets.
Each class of the Funds bears its own expenses not specifically assumed by
Boston Partners. General expenses of RBB not readily identifiable as belonging
to a portfolio of RBB are allocated among all investment portfolios by or under
the direction of RBB's Board of Directors in such manner as the Board determines
to be fair and equitable. Expenses borne by a portfolio include, but are not
limited to, the following (or a portfolio's share of the following): (a) the
cost (including brokerage commissions) of securities purchased or sold by a
portfolio and any losses incurred in connection therewith; (b) fees payable to
and expenses incurred on behalf of a portfolio by Boston Partners; (c) any
costs, expenses or losses arising out of a liability of or claim for damages or
other relief asserted against RBB or a portfolio for violation of any law; (d)
any extraordinary expenses; (e) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (f)
the cost of investment company literature and other publications provided by RBB
to its directors and officers; (g) organizational costs; (h) fees to the
investment adviser and PFPC; (i) fees and expenses of officers and directors who
are not affiliated with a portfolios' investment adviser or Distributor; (j)
taxes; (k) interest; (l) legal fees; (m) custodian fees; (n) auditing fees; (o)
brokerage fees and commissions; (p) certain of the fees and expenses of
registering and qualifying the Funds and their shares for distribution under
federal and state securities laws; (q) expenses of preparing prospectuses and
statements of additional information and distributing annually to existing
shareholders that are not attributable to a particular class of shares of RBB;
(r) the expense of reports to shareholders, shareholders' meetings and proxy
solicitations that are not attributable to a particular class of shares of RBB;
(s) fidelity bond and directors' and officers' liability insurance premiums; (t)
the expense of using independent pricing services; and (u) other expenses which
are not expressly assumed by a portfolio's investment adviser under its advisory
agreement with the portfolio. Each class of the Funds pays its own distribution
fees, if applicable, and may pay a different share than other classes of other
expenses (excluding advisory and custodial fees) if those expenses are actually
incurred in a different amount by such class or if it receives different
services.
Under the Advisory Agreement, Boston Partners will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or RBB in connection with the performance of the Advisory Agreement, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of Boston Partners in the performance of its duties or from reckless disregard of its duties and obligations thereunder.
The Advisory Agreement was most recently approved on July 29, 1998 by vote of RBB'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 initial shareholder of each class of each Fund. The Advisory Agreement is terminable by vote of RBB's Board of Directors or by the holders of a majority of the outstanding voting securities of a Fund, at any time without penalty, on 60 days' written notice to Boston Partners. The Advisory Agreement may also be terminated by Boston Partners on 60 days' written notice to RBB. The Advisory Agreement terminates automatically in the event of its assignment.
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the Funds' assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of each Fund (b) holds and transfers portfolio securities on account of each Fund, (c) accepts receipts and makes disbursements of money on behalf of the Funds, (d) collects and receives all income and other payments and distributions on account of the Funds' portfolio securities and (e) makes periodic reports to RBB's Board of Directors concerning the Funds' operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Funds, provided that PNC Bank remains responsible for the performance of all of its duties under the Custodian Agreement and holds each Fund harmless from the acts and omissions of any sub-custodian
PFPC Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Funds pursuant to a Transfer Agency Agreement dated November 5, 1991, as supplemented (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of the Funds, (b) addresses and mails all communications by the Funds to record owners of the Shares, 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 RBB's Board of Directors concerning the operations of the Funds. PFPC may, on 30 days' notice to RBB, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp.
Administration Agreement. PFPC serves as administrator to the Funds pursuant to an Administration and Accounting Services Agreement dated ____________, as amended (the "Administration Agreement"). PFPC has agreed to furnish to the Funds statistical and research data, clerical, accounting and bookkeeping services, and certain other services required by the Funds. In addition, PFPC has agreed, among other things, to prepare and file (or assist in the preparation of) certain reports with the Securities and Exchange Commission and other regulatory agencies. For its services to the Funds, PFPC is entitled to receive a fee calculated at an annual rate of .125% of each Fund's average daily net assets, with a minimum annual fee of $75,000 payable monthly on a pro rata basis. PFPC is currently waiving one-half of its minimum annual fee.
The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by RBB or the Funds in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder.
Distribution Agreement. Pursuant to the terms of a distribution agreement, dated as of May 29, 1998 (the "Distribution Agreement"), entered into by the Distributor and RBB on behalf of the Investor Classes, and a Plan of Distribution for the Investor Classes (the "Plan"), which was adopted by RBB in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will use appropriate efforts to solicit orders for the sale of Fund Shares. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee under the Plan, to be calculated daily and paid monthly by the Investor Classes at the annual rate set forth in the Prospectus.
On July 29, 1998, the Plan was approved by RBB's Board of Directors, including the directors who are not "interested persons" of RBB and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to the Plan ("12b-1 Directors"). RBB believes that the Plan may benefit the Fund by increasing sales of Fund shares.
Among other things, the Plan provides that: (1) the Distributor shall be required to submit quarterly reports to the directors of RBB regarding all amounts expended under the Plan and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendment thereto is approved, by a majority of RBB's directors, including the 12b-1 Directors, acting in person at a meeting called for said purpose; (3) the compensation payable to the Distributor pursuant to the Plan shall not be materially increased without approval by a vote of at least a majority of the Funds' outstanding shares; and (4) while the Plan remains in effect, the selection and nomination of RBB's directors who are not "interested persons" of RBB (as defined in the 1940 Act) shall be committed to the discretion of such directors who are not "interested persons" of RBB.
Each of Messrs. Reichman and Sablowsky, directors of RBB, has an indirect financial interest in the operation of the Plans by virtue of his position with Counsellors Securities, Inc. and Fahnestock Co., Inc., respectively, both of which are broker-dealers.
Administrative Services Agent. Provident Distributors, Inc. ("PDI") provides certain administrative services to the Institutional Class of the Fund that are not provided by PFPC, pursuant to an Administrative Services Agreement, dated May 29, 1998, between RBB and PDI. These services include furnishing data processing and clerical services, acting as liaison between the Funds and various service providers and coordinating the preparation of annual, semi-annual and quarterly reports. As compensation for such administrative services, PDI is entitled to a monthly fee calculated at the annual rate of .15% of each Fund's average daily net assets. PDI is currently waiving fees in excess of .03% of each fund's average daily net assets.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors, Boston Partners is responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Funds. In purchasing and selling portfolio securities, Boston Partners seeks to obtain the best net price and the most favorable execution of orders. To the extent that the execution and price offered by more than one broker/dealer are comparable, the Adviser may effect transactions in portfolio securities with broker/dealers who provide research, advice or other services such as market investment literature.
Investment decisions for each Fund and for other investment accounts managed by Boston Partners are made independently of each other in the light of differing conditions. However, the same investment decision may be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Fund is concerned, in other cases it is believed to be beneficial to a particular Fund.
PURCHASE AND REDEMPTION INFORMATION
RBB reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Fund's shares by making payment in whole or in part in securities chosen by RBB and valued in the same way as they would be valued for purposes of computing a Fund's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. RBB has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Funds are obligated to redeem their shares solely in cash up to the lesser of $250,000 or 1% of their respective net asset values during any 90-day period for any one shareholder of a Fund.
Under the 1940 Act, RBB 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 the NYSE is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (RBB may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
The computation of the hypothetical offering price per share of an Institutional and Investor Share of a Fund based on the projected value of the Fund's estimated net assets and number of Institutional and Investor Shares outstanding is as follows:
Boston Partners Market Neutral Fund
Institutional Shares Investor Shares
-------------------- ---------------
Net Assets............................. $10.00 $10.00
Outstanding Shares..................... 1 1
Net Asset Value
per Share............................. $10.00 $10.00
Maximum Sales Charge................... 0% 0%
Maximum Offering Price
to Public............................ $10.00 $10.00
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Boston Partners Long-Short Equity Fund
Institutional Shares Investor Shares
-------------------- ----------------
Net Assets............................. $10.00 $10.00
Outstanding Shares..................... 1 1
Net Asset Value
per Share............................. $10.00 $10.00
Maximum Sales Charge................... 0% 0%
Maximum Offering Price
to Public............................ $10.00 $10.00
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VALUATION OF SHARES
The net asset values per share of each class of the Funds are calculated as of the close of the NYSE, generally 4:00 p.m. Eastern Time on each Business Day. "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 on the preceding Friday and subsequent Monday when one of these holidays falls on Saturday or Sunday. Net asset value per share, the value of an individual share in a Fund, is computed by adding the value of the proportionate interest of each class in a 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 the class. The net asset values of each class are calculated independently of the other classes. Securities that are listed on stock exchanges 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 evaluation. 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 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 RBB'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.
In determining the approximate market value of portfolio investments, each Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on a Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by RBB's Board of Directors.
PERFORMANCE AND YIELD INFORMATION
Total Return. Each Fund may from time to time advertise its "average annual total return." Each Fund computes 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
T = [(-----)1/n - 1]
P
Where: T = average annual total return;
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 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.
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Each Fund, when advertising its "aggregate total return," computes 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.
TAXES
The following is only a summary of certain additional tax considerations generally affecting the Funds and their shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Funds or their shareholders, and the discussion here and in the Prospectuses is not intended as a substitute for careful tax planning. Investors are urged to consult their tax advisers with specific reference to their own tax situation.
Each Fund has elected to be taxed as a regulated investment company under
Part I of Subchapter M of Subtitle A, Chapter 1 of the Internal Revenue Code of
1986, as amended (the "Code"). As a regulated investment company, each Fund is exempt from federal income tax on its net investment income and realized capital gains that it distributes to shareholders, provided that it distributes an amount equal to the sum of (a) at least 90% of its investment company taxable income (net taxable investment income and the excess of net short-term capital gain over net long-term capital loss, if any, for the year) and (b) at least 90% of its net tax-exempt interest income, if any, for the year (the "Distribution Requirement") and satisfies certain other requirements of the Code that are described below. Distributions of investment company taxable income made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year will satisfy the Distribution Requirement.
In addition to the foregoing requirements, at the close of each quarter of a Fund's 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 a 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").
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 a Fund in the form of additional shares will be treated as receiving a taxable distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.
Each Fund intends to distribute to shareholders its net capital gain (excess of net long-term capital gain over net short-term capital loss), if any, for each taxable year. Such gain is distributed as a capital gain dividend and is taxable to shareholders as long-term capital gain, regardless of the length of time the shareholder has held his shares, whether such gain was recognized by a Fund prior to the date on which a shareholder acquired shares of the Fund and whether the distribution was paid in cash or reinvested in shares. The aggregate amount of distributions designated by the Fund as capital gain dividends may not exceed the net capital gain of a Fund for any taxable year, determined by excluding any net capital loss or 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 each Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
In the case of shareholders that are corporations, distributions (other than capital gain dividends) of a Fund for any taxable year generally qualify for the dividends received deduction 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" if it has been received from a domestic corporation. Distributions of net investment income received by a Fund from investments in debt securities will be taxable to shareholders as ordinary income and will not be treated as "qualifying dividends" for purposes of the dividends received deduction. A Fund 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 Fund to corporate shareholders not later than 60 days after the close of the Fund's taxable year.
If for any taxable year a Fund were to fail to qualify as a regulated investment company, all of its taxable income would be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and all distributions would be taxable as ordinary dividends to the extent of the Fund's current and accumulated earnings and profits. Such distributions would be eligible for the dividends received deduction in the case of corporate shareholders.
A shareholder will recognize gain or loss upon a redemption of shares or an exchange of shares of a Fund for shares of another Boston Partners Fund upon exercise of the exchange privilege, to the extent of any difference between the price at which the shares are redeemed or exchanged and the price or prices at which the shares were originally purchased for cash. However, any loss realized on a sale of shares of a 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 nondeductible 4% excise tax on regulated investment companies that do not distribute with respect to each calendar year an amount equal to 98% of their ordinary income for the calendar year plus 98% of their capital gain net income for the 1-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. Investors should note that a Fund may in certain circumstances be required to liquidate investments in order to make sufficient distributions to avoid excise tax liability.
A Fund will be required in certain cases to withhold and remit to the United States Treasury 31% of dividends paid to any shareholder (1) who has provided either an incorrect tax identification number or no number at all, (2) who is subject to backup withholding by the Internal Revenue Service for failure to report the receipt of interest or dividend income properly, or (3) who has failed to certify to the Fund that he is not subject to backup withholding or that he is an "exempt recipient."
The foregoing general discussion of federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Although a 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, a Fund may be subject to the tax laws of such states or localities.
ADDITIONAL INFORMATION CONCERNING RBB SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified in __ classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 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 III and JJJ Common Stock constitute the Boston Partners Market Neutral Fund Institutional and Investor classes, respectively. Shares of the Class KKK and LLL Common Stock constitute the Boston Partners Long-Short Equity Fund Institutional and Investor classes, respectively. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into 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 Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Funds; the BEA Family represents interests in ten non-money market portfolios; the n/i Numeric Investors Family represents interests in four non-money market portfolios; the Boston Partners Family represents interests in six non-money market portfolios; the Schneider Capital Management Family represents interest in one non-money market portfolio; the Janney Montgomery Scott Family and the Beta, Gamma, Delta, Epsilon, Zeta, Eta and Theta Families represent interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Funds.
RBB does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. RBB's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of RBB 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, RBB will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of each Fund will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of each Fund will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only
the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of the 1940 Act or applicable state law, or otherwise, to the holders of the outstanding securities of an investment company such as the Funds shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities, as defined in the 1940 Act, of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under Rule 18f-2, 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, as defined in the 1940 Act, of such portfolio. However, Rule 18f-2 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 RBB's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law, or by RBB's Articles of Incorporation, RBB 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 entitled to vote on the matter 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 RBB and the non-interested directors.
Independent Accountants. PricewaterhouseCoopers, 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as RBB's independent accountants.
Control Persons. As of July 29, 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.
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.24%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
Indiana University Foundation 5.06%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 45.77%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
Clariden Bank 6.92%
Clariden Str. 26
CH-8002 Zurich
Switzerland
National Academy of Sciences 5.36%
2101 Constitution Ave. NW
Washington, DC 20418-0006
Arkansas Public Emp. Retirement Syst. 31.99%
124 W. Capitol Ave.
Little Rock, AR 72201-3704
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 6.77%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
Credit Suisse Private Banking Dividend 6.85%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
Washington Hebrew Congregation 11.84%
3935 Macomb St., NW
Washington, DC 20016-3799
Fleet National Bank Trst. 5.86%
Hospital St. Raphael Malpractice
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Patterson & Co. 47.58%
P.O. Box 7829
Philadelphia, PA 19101-7829
BEA U.S. CORE FIXED INCOME - Fidelity Investments Institutional Operations 5.11%
INSTITUTIONAL Co. Inc. (FIIOC) as Agent for Credit Suisse
First Boston Employee's Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987`
The Northern Trust Company TTEE 13.26%
Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
Winifred Masterson Burke Foundation 6.25%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
New England UFCW & Employers' Pension Fund 12.28%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 52.73%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
Patterson & Co. 37.70%
P.O. Box 7829
Philadelphia, PA 19101-7829
State St. Bank & Trust TTEE 5.48%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
BEA HIGH YIELD- INSTITUTIONAL Carl F Besenbach 18.69%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
Southdown Inc. Pension Pl 9.78%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Edward J. Demske TTEE 5.64%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
Fidelity Investments Institutional Operations 17.33%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
MAC & CO A/C CSBF8605082 5.27%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.58%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
William A. Marquard 35.98%
2199 Maysville Rd.
Carlisle, KY 40311-9716
Leo Bogart 5.21%
135 Central Park West 9N
New York, NY 10023-2465
Howard Isermann 8.85%
9 Tulane Dr.
Livingston, NJ 07039-6212
BEA INT'L EQUITY ADVISOR TRANSCORP 9.46%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
Charles Schwab & Co. 6.14%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
Bob & Co. 76.57%
P.O. Box 1809
Boston, MA 02105-1809
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 80.01%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
NFSC FEBO # 114-623016 14.21%
Fmt Co Cust IRA
FBO Patricia F. Powell
5811 Valley Oak Dr.
Los Angeles, CA 90068-3650
Charles Schwab & Co. 5.01%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 13.01%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
Charles Schwab & Co. 6.51%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
John B. Hurford 35.44%
153 E. 53rd St., Fl. 57
New York, NY 10022-4611
FTC & Co. 17.95%
Attn: DATALYNX #148
P.O. Box 173736
Denver, CO 80217-3736
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 97.49%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 46.969%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
Marian E. Kunz 12.563%
52 Weiss Ave.
Flourtown, PA 19031
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
SAMSON STREET MONEY MARKET Saxon and Co. 69.816%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
Wasner & Co. for Account of 29.418%
Paine Webber and Managed Assets
Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
CASH PRESERVATOIN Gary L. Lange 36.707%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
1354 Shady Knoll Ct.
Longwood, FL 32750
Andrew Diederich 6.662%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
Kenneth Farwell 12.088%
and Valerie Farwell
3854 Sullivan
St. Louis, MO 63107
Gwendolyn Haynes 5.416%
2757 Geyer
St. Louis, MO 63104
Emil R. Hunter and 7.568%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.991%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Janis Claflin, Bruce Fetzer and 5.228%
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 7.330%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
Portland General Holdings Inc. 16.625%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
State Street Bank and Trust Company 8.494%
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
N/I GROWTH FUND Charles Schwab & Co. Inc 18.015%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Citibank North America Inc. 19.876%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
U.S. Equity Investment Portfolio LP 5.955%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
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FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Union Bank of California 5.026%
Trst Sunkist Growers-Match-Svgspln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 21.190%
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. 7.635%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
Bankers Trust Cust Pge-Enron Foundation 5.298%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 18.585%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Bank of America NT & SA 17.965%
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
The John E. Fetzer Institute, Inc. 47.496
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 17.025%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 29302
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Saxon And Co. 6.141%
FBO UJF Equity Funds
AC 10-01-001-0578481
P.O. Box 7780-1888
Philadelphia, PA 19182
Irving Fireman's Relief & Ret Fund 7.599%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
Wells Fargo Bank 6.802%
Trst Stoel Rives
Tr 008125
P.O. Box 9800
Calabasas, CA 91308
James B. Beam 6.414%
Trst World Publishing Co Pft Shr Trust
P.O. Box 1511
Wenatchee, WA 98807
Swanee Hunt and Charles Ansbacher 8.238%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
Swanee Hunt and Charles Ansbacher 6.325%
Trst The Hunt Alternatives Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
Samuel Gary and Ronald Williams 7.203%
And David Younggren
Trst Gary Tax Advantaged PRO+ PSP
370 17th St. Suite 5300
Denver, CO 80202
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.855%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Charles Schwab & Co. Inc. 74.190%
Special Custody Account for the Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 11.857%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
North American Trst. Co. 5.996%
FBO Cooley Godward
P.O. Box 84419
San Diego, CA 92138
John Carroll University 6.954%
20700 N. Park Blvd.
University Heights, OH 44118
MAC & CO. 9.803%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
ISTCO 6.970%
P.O. Box 523
Belleville, IL 62222-0523
Coastal Insurance Enterprises Inc. 8.965%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery AL 36124
Healthcare Workers Compensation Fund 6.207%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery AL 36124
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 13.294%
INV SHARES Bene of Our Customers Sal Vella
200 Liberty St.
New York, NY 10281
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Charles Schwab & Co. Inc. 45.603%
Special Custody Account for Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
George B. Smithy, Jr 5.110%
38 Greenwood Rd.
Wellesley, MA 02181
Jupiter & Co. 5.962%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02010
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
Chiles Foundation 16.727%
111 S.W. Fifth Ave.
4010 US Bancorp Tower
Portland, OR 97204
The Roman Catholic Diocese of 39.114%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
The Roman Catholic Diocese of 8.992%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.006%
SHARES Special Custody Account for Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Donaldson Lufkin & Jenrette 5.076%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
|
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
--------- ---------------------------- -----------------------
Stephen W. Hamilton 15.277%
17 Lakeside Ln
N. Barrington, IL 60010
BOSTON PARTNERS Desmond J. Heathwood 6.809%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
Boston Partners Asset Management LP 67.746%
One Financial Center
43rd Floor
Boston, MA 02111
Wayne Archambo 6.809%
42 DeLopa Circle
Westwood, MA 02090
David M. Dabora 6.809%
11 White Plains Ct.
San Anselmo, CA 94960
BOSTON PARTNERS National Financial Services Corp. 34.856%
MICRO CAPVALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
Scott J. Harrington 62.124%
54 Torino Ct.
Danville, CA 94526
|
As of the above date, directors and officers as a group owned less than one percent of the shares of the Company.
Other Communications. From time to time, references to the Funds may appear in advertisements and sales literature for certain products or services offered by the Adviser, its affiliates or others, through which it is possible to invest in one or more Funds managed by the Adviser.
The Funds may also from time to time include discussions or illustrations of the effects of compounding in advertisements. "Compounding" refers to the fact that, if dividends or other distributions of a Fund investment are reinvested by being paid in additional Fund shares, any future income or capital appreciation of a Fund would increase the value, not only of the original Fund investment, but also of the additional Fund shares received through reinvestment.
As a result, the value of a Fund investment would increase more quickly than if dividends or other distributions had been paid in cash.
The Funds or Adviser may also include discussions or illustrations of the potential investment goals of a prospective investor, investment management strategies, techniques, policies or investment suitability of a Fund or that employed by the Adviser (such as value investing, market timing, dollar cost averaging, asset allocation, constant ratio transfer, automatic accounting rebalancing, the advantages and disadvantages of investing in tax-deferred and taxable instruments), economic conditions, risk and volatility assessments, the relationship between sectors of the economy and the economy as a whole, various securities markets, the effects of inflation and historical performance of various asset classes, including but not limited to, stocks, bonds and Treasury bills. The Funds or Adviser may also include in such advertisements or communications additional information concerning the Adviser and/or its employees or owners, its management philosophies, operating strategies and other advisory clients, as well as statements about the Adviser attributed to others. From time to time advertisements or communications to shareholders may summarize the substance of information contained in shareholder reports (including the investment composition of a Fund), as well as the view of the Adviser or Fund as to current market, economy, trade and interest rate trends, legislative, regulatory and monetary developments, investment strategies and related matters believed to be of relevance to a Fund or an investor generally. The Funds or Adviser may also include in advertisements charts, graphs or drawings which compare the investment objective, return potential, relative stability and/or growth possibilities of the Funds and/or other mutual funds, or illustrate the potential risks and rewards of investment in various investment vehicles, including but not limited to, stocks, bonds, Treasury bills and shares of the Funds. In addition, advertisements or shareholder communications may include a discussion of certain attributes or benefits to be derived by an investment in a Fund and/or other mutual funds, shareholder profiles and hypothetical investor scenarios, timely information on financial management, tax and retirement planning and investment alternatives to certificates of deposit and other financial instruments. Such advertisements or communications may include symbols, headlines or other material which highlight or summarize the information discussed in more detail therein.
Litigation. There is currently no material litigation affecting RBB.
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" - The highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
"A-2" - Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
"B" - Issues are regarded as having only a speculative capacity for timely payment.
"C" - This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
"D" - Issues are in payment default. The "D" rating category is used when interest payments of principal payments 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.
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 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 effects 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.
Corporate Long-Term Debt Ratings
The following summarizes the ratings used by Standard & Poor's for corporate debt:
"AAA" - This designation represents the highest rating assigned by Standard & Poor's. 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.
"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 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" - 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.
(P)... - When applied to forward delivery bonds, indicates that the rating is provisional pending delivery of the bonds. The rating may be revised prior to delivery if changes occur in the legal documents or the underlying credit quality of the bonds.
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.
SCHNEIDER SMALL CAP VALUE FUND
OF
THE RBB FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information pertaining to shares (the "Shares") representing interest in the Schneider Small Cap Value Fund (the "Fund") of The RBB Fund, Inc. ("RBB"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Schneider Small Cap Value Fund Prospectus, dated ____________________________________________, 1998 (the "Prospectus"). A copy of the Prospectus may be obtained from RBB by calling toll-free (800) 888-9723 or 9829. This Statement of Additional Information is dated __________________________________________, 1998.
CONTENTS
GENERAL..........................................................
INVESTMENT OBJECTIVES AND POLICIES...............................
DIRECTORS AND OFFICERS...........................................
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS.....
PORTFOLIO TRANSACTIONS........................................... PURCHASE AND REDEMPTION INFORMATION..............................
VALUATION OF SHARES..............................................
PERFORMANCE AND YIELD INFORMATION................................ TAXES............................................................
ADDITIONAL INFORMATION CONCERNING RBB SHARES..................... MISCELLANEOUS....................................................
APPENDIX A.......................................................
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 RBB OR ITS DISTRIBUTOR. THE PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
GENERAL
The RBB Fund, Inc. ("RBB") is an open-end management investment company currently operating or proposing to operate seventeen separate investment portfolios. RBB was organized as a Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Fund.
ADDITIONAL INFORMATION ON FUND INVESTMENTS.
LENDING OF FUND SECURITIES. The Fund may lend its portfolio securities to financial institutions in accordance with the investment restrictions described below. 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 Schneider Capital Management Company (the "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.
INDEXED SECURITIES. The Fund may invest in indexed securities whose value is linked to securities indices. Most such securities have values which rise and fall according to the change in one or more specified indices, and may have characteristics similar to direct investments in the underlying securities. The Fund does not presently intend to invest more than 5% of its net assets in indexed securities.
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 the securities at an agreed-upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940 (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Fund will maintain in a segregated account with the Fund's custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement and will monitor the account to ensure that such value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase. The Fund may also enter into "dollar rolls," in which it sells fixed income securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, 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 engage in reverse repurchase or dollar roll transactions involving more than 5% of the Fund's net assets.
U.S. GOVERNMENT OBLIGATIONS. The Fund may purchase U.S. Government agency and instrumentality obligations that are debt securities issued by U.S. Government-sponsored enterprises and federal agencies. Some obligations of agencies and instrumentalities of the U.S. Government are supported by the full faith and credit of the U.S. Government or by U.S. Treasury guarantees, such as securities of the Government National Mortgage Association and the Federal Housing Authority; others, by the ability of the issuer to borrow, provided approval is granted, from the U.S. Treasury, such as securities of the Federal Home Loan Mortgage Corporation and others, only by the credit of the agency or instrumentality issuing the obligation, such as securities of the Federal National Mortgage Association and the Federal Loan Banks.
The Fund's net assets may be invested in obligations issued or guaranteed by the U.S. Treasury or the agencies or instrumentalities of the U.S. Government, including options and futures on such obligations. The maturities of U.S. Government securities usually range from three months to thirty years. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, the Maritime Administration, the Asian-American Development Bank and the Inter-American Development Bank.
HEDGING INVESTMENTS. At such times as the Adviser deems it appropriate and consistent with the investment objective of the Fund, the Fund may invest in financial futures contracts and options on financial futures contracts. The purpose of such transactions is to hedge against changes in the market value of securities in the Fund caused by fluctuating interest rates and to close out or offset its existing positions in such futures contracts or options as described below. Such instruments will not be used for speculation. Futures contracts and options on futures are discussed below.
FUTURES CONTRACTS. The Fund may invest in financial futures contracts with respect to those securities listed on the S&P 500 Stock Index. Financial futures contracts obligate the seller to deliver a specific type of security called for in the contract, at a specified future time, and for a specified price. Financial futures contracts may be satisfied by actual delivery of the securities or, more typically, by entering into an offsetting transaction. There are risks that are associated with the use of futures contracts for hedging purposes. In certain market conditions, as in a rising interest rate environment, sales of futures contracts may not completely offset a decline in value of the portfolio securities against which the futures contracts are being sold. In the futures market, it may not always be possible to execute a buy or sell order at the desired price, or to close out an open position due to market conditions, limits on open positions, and/or daily price fluctuations. Risks in the use of futures contracts also result from the possibility that changes in the market interest rates may differ substantially from the changes anticipated by the Fund's investment adviser when hedge positions were established. The Fund does not presently intend to invest more than 5% of net assets in futures contracts.
OPTIONS ON FUTURES. The Fund may purchase and write call and put options on futures contracts with respect to those securities listed on the S&P 500 Stock Index and enter into closing transactions with respect to such options to terminate an existing position. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract. The Fund may use options on futures contracts in connection with hedging strategies. The purchase of put options on futures contracts is a means of hedging against the risk of rising interest rates. The purchase of call options on futures contracts is a means of hedging against a market advance when the Fund is not fully invested.
There is no assurance that the Fund will be able to close out its financial futures positions at any time, in which case it would be required to maintain the margin deposits on the contract. There can be no assurance that hedging transactions will be successful, as there may be imperfect correlations (or no correlations) between movements in the prices of the futures contracts and of the securities being hedged, or price distortions due to market conditions in the
futures markets. Such imperfect correlations could have an impact on the Fund's ability to effectively hedge its securities. The Fund does not presently intend to invest more than 5% of net assets in options on futures.
BANK AND CORPORATE OBLIGATIONS. The Fund may purchase obligations of issuers in the banking industry, such as short-term obligations of bank holding companies, certificates of deposit, bankers' acceptances and time deposits issued by U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. Investment in obligations of foreign banks or foreign branches of U.S. banks may entail risks that are different from those of investments in obligations of U.S. banks due to differences in political, regulatory and economic systems and conditions. The Fund may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its total assets.
The Fund may invest in debt obligations, such as bonds and debentures, issued by corporations and other business organizations that are rated at the time of purchase within the three highest ratings categories of S&P or Moody's (or which, if unrated, are determined by the Adviser to be of comparable quality). Unrated securities will be determined to be of the comparable quality to rated debt obligations if, among other things, other outstanding obligations of the issuers of such securities are rated A or better. See Appendix "A" for a description of corporate debt ratings.
COMMERCIAL PAPER. The Fund may purchase commercial paper rated (at the time of purchase) "A-1" by S&P or "Prime-1" by Moody's or, when deemed advisable by the Adviser, issues rated "A-2" or "Prime-2" by S&P or Moody's, respectively. These rating symbols are described in Appendix "A" hereto. The Fund may also purchase unrated commercial paper provided that such paper is determined to be of comparable quality by the Fund's Adviser pursuant to guidelines approved by the Fund's Board of Directors. Commercial paper issues in which the Fund may invest include securities issued by corporations without registration under the Securities Act of 1933, as amended (the "Securities Act") in reliance on the exemption from such registration afforded by Section 3(a)(3) thereof, and commercial paper issued in reliance on the so-called "private placement" exemption from registration, which is afforded by Section 4(2) of the Securities Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition under the federal securities laws in that any resale must similarly be made in an exempt transaction. Section 4(2) paper is normally resold to other institutional investors through or with the assistance of investment dealers who make a market in Section 4(2) paper, thus providing liquidity.
FOREIGN SECURITIES. The Fund may invest in foreign securities, either directly or indirectly through American Depository Receipts and European Depository Receipts. Investments in foreign securities involve higher costs than investments in U.S. securities, including higher transaction costs as well as the imposition of additional taxes by foreign governments. In addition, foreign investments may include additional risks associated with currency exchange rates, less complete financial information about the issuers, less market
liquidity and political stability. Future political and economic information, the possible imposition of withholding taxes on interest income, the possible seizure or nationalization of foreign holdings, the possible establishment of exchange controls, or the adoption of other governmental restrictions, might adversely affect the payment of principal and interest on foreign obligations.
Although the Fund may invest in securities denominated in foreign currencies, the Fund values its securities and other assets in U.S. dollars. As a result, the net asset value of the Fund's shares may fluctuate with U.S. dollar exchange rates as well as the price changes of the Fund's securities in the various local markets and currencies. Thus, an increase in the value of the U.S. dollar compared to the currencies in which the Fund makes its investments could reduce the effect of increases and magnify the effect of decreases in the price of the Fund's securities in their local markets. Conversely, a decrease in the value of the U.S. dollar may have the opposite effect of magnifying the effect of increases and reducing the effect of decreases in the prices of the Fund's securities in its foreign markets. In addition to favorable and unfavorable currency exchange rate developments, the Fund is subject to the possible imposition of exchange control regulations or freezes on convertibility of currency.
INVESTMENT LIMITATIONS.
RBB 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 or issue senior securities, except that the Fund may borrow from banks 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.
2. 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;
3. Purchase or sell real estate (including real estate limited partnership interests), provided that the Fund may invest (a) in securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein or (b) in real estate investment trusts;
4. Purchase or sell commodities or commodity contracts, except that the Fund may deal in forward foreign exchanges 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;
5. 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;
6. Invest 25% or more of its assets, taken at market value at the time of each investment, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities); or
7. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase, more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations.
8. Purchase any securities which would cause, at the time of purchase, 25% or more of the value of the total assets of the Fund to be invested in the obligations of issuers in any single industry, provided that there is no limitation with respect to investments in U.S. Government obligations.
(For purposes of Investment Limitation No. 1, any collateral arrangements with respect to, if applicable, the writing of options and futures contracts, options on futures contracts, and collateral arrangements with respect to initial and variation margin are not deemed to be a
pledge of assets. For purposes of Investment Limitation No. 2, neither the foregoing arrangements nor the purchase or sale of futures or related options are deemed to be the issuance of senior securities.)
The Fund may invest in securities issued by other investment companies within the limits prescribed 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.
Except as required by the 1940 Act with respect to the borrowing of money and the limitation on illiquid holdings, 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 permitted under the 1940 Act.
DIRECTORS AND OFFICERS
The directors and executive officers of RBB, their ages, business addresses and principal occupations during the past five years are:
================================================================================
NAME AND ADDRESS AND AGE Position Principal Occupation
WITH FUND DURING PAST FIVE YEARS
--------------------------------------------------------------------------------
*Arnold M. Reichman -50 Director Senior Managing Director, Chief
466 Lexington Avenue Operating Officer and Assistant
New York, NY 10017 Secretary, Warburg Pincus Asset
Management Inc.; Director and
Executive Officer of Counsellors
Securities Inc.; Director/Trustee
of various investment companies
advised by Warburg Pincus Asset
Management, Inc.
--------------------------------------------------------------------------------
*Robert Sablowsky -59 Director Senior Vice President, Fahnestock
110 Wall Street Co., Inc. (a registered broker-
New York, NY 10005 dealer); Prior to October 1996,
Executive Vice President of
Gruntal & Co., Inc. (a registered
broker-dealer).
--------------------------------------------------------------------------------
Francis J. McKay -61 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer Center
Philadelphia, PA 19111 (biomedical research and medical
care).
--------------------------------------------------------------------------------
Marvin E. Sternberg -63 Director Since 1974, Chairman, Director
937 Mt. Pleasant Road and President, Moyco Industries,
Bryn Mawr, PA 19010 Inc. (manufacturer of dental
supplies and precision coated
abrasives); since 1968, Director
and President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart Inc.) and Mart
PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc.) (shopping
centers); and since 1975,
Director and Executive Vice
President, Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).
================================================================================
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================================================================================
NAME AND ADDRESS AND AGE Position Principal Occupation
WITH FUND DURING PAST FIVE YEARS
--------------------------------------------------------------------------------
Julian A. Brodsky -64 Director Director and Vice Chairman since
1234 Market Street 1969 Comcast Corporation (cable
16th Floor television and communications);
Philadelphia, PA 19107-3723 Director Comcast Cablevision of
Philadelphia (cable television and
communications) and Nextel
(wireless communications).
--------------------------------------------------------------------------------
Donald van Roden -73 Director and Self-employed businessman. From
1200 Old Mill Lane Chairman of February 1980 to March 1987, Vice
Wyomissing, PA 19610 the Board Chairman, SmithKline Beecham
Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.
--------------------------------------------------------------------------------
Edward J. Roach -74 President Certified Public Accountant; Vice
Suite 100 And Chairman of the Board, Fox Chase
Bellevue Park Treasurer Cancer Center; Trustee Emeritus,
Corporate Center Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata
Wilmington, DE 19809 College;President or Vice
President and Treasurer of various
investment companies advised by
PNC Institutional Management
Corporation; Director, The
Bradford Funds, Inc.
--------------------------------------------------------------------------------
Morgan R. Jones -59 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Rocking Horse Child
Philadelphia, PA 19107-3496 Care Centers of America, Inc.
================================================================================
----------------------
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* Each of Mr. Sablowsky and Mr. Reichman is an "interested person" of RBB, as that term is defined in the 1940 Act, by virtue of his position with Fahnestock Co., Inc. and Counsellors Securities Inc., respectively, each 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 RBB 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 RBB 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 RBB.
RBB pays directors $12,000 annually and $1,250 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 fee of $6,000 per year for his services in this capacity. 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, 1998, each of the following members of the Board of Directors received compensation from RBB in the following amounts:
DIRECTORS' COMPENSATION
PENSION OR
RETIREMENT
BENEFITS
AGGREGATE ACCRUED AS ESTIMATED ANNUAL
COMPENSATION PART OF FUND BENEFITS UPON
NAME OF PERSON/POSITION FROM REGISTRANT EXPENSES RETIREMENT
----------------------- --------------- ------------ ----------------
Julian A. Brodsky, $ N/A N/A
Director
Francis J. McKay, $ N/A N/A
Director
Arnold M. Reichman, $ N/A N/A
Director
Robert Sablowsky, $ N/A N/A
Director
Marvin E. Sternberg, $ N/A N/A
Director
Donald van Roden, $ N/A N/A
Director and Chairman
----------------------
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On October 24, 1990, RBB adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach and one other employee), pursuant to which RBB 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 RBB's advisers, custodians, administrators and distributor, RBB itself requires only two part-time employees. Drinker Biddle & Reath LLP, of which Mr. Jones is a partner, receives legal fees as counsel to RBB. No officer, director or employee of the Adviser or the Distributor currently receives any compensation from RBB.
INVESTMENT ADVISORY, DISTRIBUTION
AND SERVICING ARRANGEMENTS
ADVISORY AGREEMENT. Schneider Capital Management Company renders advisory services to the Fund pursuant to an Investment Advisory Agreement dated September 1, 1998 (the "Advisory Agreement").
The Adviser is a Pennsylvania corporation and has been managing assets for institutional accounts since 1996. The Adviser currently acts as investment adviser for two other investment companies registered under the 1940 Act, Frank Russell Investment Management Company-Equity Fund I, and Frank Russell Investment Management Company-Diversified Equity Fund. As of ___________, 1998, the Adviser managed approximately $___ billion in assets. The Adviser is a registered investment advisor under the Investment Advisors Act of 1940, as amended.
The Adviser is an active, equity value manager that believes a disciplined fundamental approach can consistently add value in a market that has shown to be extremely efficient with current data, but less so with future events. Schneider Capital Management Co. is research intensive and focuses on new ideas, believing that the market is slow to react to change, particularly where out-of-favor stocks are concerned. The Advisor strives to act on them as soon as possible to generate above-average returns.
The Adviser has investment discretion for the Fund and will make all decisions affecting assets in the Fund under the supervision of RBB's Board of Directors and in accordance with the Fund's stated policies. The Adviser will select investments for the Fund. For its services to the Fund, the Adviser is entitled to receive a monthly advisory fee under the Advisory Agreement computed at an annual rate of 1.00% of the Fund's average daily net assets.
For the fiscal year ended August 31, 1998, the Fund paid BIMC advisory fees as follows:
The Fund bears its own expenses not specifically assumed by the Adviser. General expenses of RBB not readily identifiable as belonging to a portfolio of RBB are allocated among all investment portfolios by or under the direction of RBB's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by a portfolio include, but are not limited to, the following (or a portfolio's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by a portfolio and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of a portfolio by the Adviser; (c) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against RBB or a portfolio for violation of any law; (d) any extraordinary expenses; (e) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (f) the cost of investment company literature and other publications provided by RBB to its directors and officers; (g) organizational costs; (h) fees to the Adviser and PFPC; (i) fees and expenses of officers and directors who are not affiliated with the Adviser or Distributor; (j) taxes; (k) interest; (l) legal
fees; (m) custodian fees; (n) auditing fees; (o) brokerage fees and commissions;
(p) certain of the fees and expenses of registering and qualifying the Fund and
its shares for distribution under federal and state securities laws; (q)
expenses of preparing prospectuses and statements of additional information and
distributing annually to existing shareholders that are not attributable to a
particular class of shares of RBB; (r) the expense of reports to shareholders,
shareholders' meetings and proxy solicitations that are not attributable to a
particular class of shares of RBB; (s) fidelity bond and directors' and
officers' liability insurance premiums; (t) the expense of using independent
pricing services; and (u) other expenses which are not expressly assumed by the
Adviser under its advisory agreement with the portfolio. Each class of the Fund
pays its own distribution fees, if applicable, and may pay a different share
than other classes of other expenses (excluding advisory and custodial fees) if
those expenses are actually incurred in a different amount by such class or if
it receives different services.
Under the Advisory Agreement, the Adviser will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or RBB in connection with the performance of the Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties or from reckless disregard of its duties and obligations thereunder.
The Advisory Agreement was approved on January 21, 1998 by vote of RBB'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 initial shareholder of the Fund. The Advisory Agreement is terminable by vote of RBB'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 the Adviser. The Advisory Agreement may also be terminated by the Adviser on 60 days' written notice to RBB. The Advisory Agreement terminates automatically in the event of its assignment.
CUSTODIAN AND TRANSFER AGENCY AGREEMENTS. PNC Bank is
custodian of the Fund's assets pursuant to a custodian agreement dated August
16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement,
PNC Bank (a) maintains a separate account or accounts in the name of the 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 RBB's Board of
Directors concerning the Fund's operations. PNC Bank is authorized to select one
or more banks or trust companies to serve as sub-custodian on behalf of the
Fund, provided that PNC Bank remains responsible for the performance of all of
its duties under the Custodian Agreement and holds the Fund harmless from the
acts and omissions of any sub-custodian.
PFPC Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement dated November 5, 1991, as supplemented (the "Transfer Agency Agreement"), under which PFPC (a) issues and redeems shares of the Fund, (b) addresses and mails all communications by the Fund to record owners of the Shares, 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 RBB's Board of Directors concerning the operations of the Fund. PFPC may, on 30 days' notice to RBB, assign its duties as transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp.
ADMINISTRATION AND ADMINISTRATIVE SERVICES AGREEMENTS. PFPC serves as administrator to the Fund pursuant to an Administration and Accounting Services Agreement dated September 1, 1998, (the "Administration Agreement"). PFPC has agreed to furnish to the Fund statistical and research data, clerical, accounting and bookkeeping services, and certain other services required by the Fund. In addition, PFPC has agreed to, among other things, prepare and file (or assist in the preparation) of certain reports with the SEC and other regulatory agencies. For its services to the Fund, PFPC is entitled to receive a fee calculated at an annual rate of .125% of the Fund's average daily net assets, with a minimum monthly fee of $8,333.
The Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by RBB or the Fund in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder.
Provident Distributors, Inc. ("PDI") provides certain administrative services to the Fund that are not provided by PFPC, pursuant to an Agreement dated May 29, 1998 (the "Administrative Services Agreement"). Such services are provided subject to the supervision and direction of the Board of Directors of the Company.
The Administrative Services Agreement provides that PDI shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund in connection with the performance of services under the Agreement, except a loss resulting from willful misfeasance, negligence or reckless disregard of its duties and obligations thereunder.
As compensation for its services to the Fund under the Administrative Services Agreement, PDI receives a monthly fee for the previous month calculated at the annual rate of .15% of the average daily net assets of the Fund.
For the fiscal year ended August 31, 1998, the Fund paid PFPC administration fees, and PFPC waived fees and/or reimburse expenses as follows:
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors, the Adviser is responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Fund. In purchasing and selling portfolio securities, the Adviser seeks to obtain the best net price and the most favorable execution of orders. To the extent that the execution and price offered by more than one broker/dealer are comparable, the Adviser may effect transactions in portfolio securities with broker/dealers who provide research, advice or other services such as market investment literature.
Investment decisions for the Fund and for other investment accounts managed by the Adviser are made independently of each other in the light of differing conditions. However,
the same investment decision may be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Fund is concerned, in other cases it is believed to be beneficial to the Fund.
The Fund expects that its annual portfolio turnover rate will not exceed 75%. A high rate (100% or more) of portfolio turnover involves correspondingly greater brokerage commission expenses and other transaction costs that 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 a portfolio's annual sales or purchases of portfolio securities (exclusive of purchases or sales of securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the portfolio during the year.
PURCHASE AND REDEMPTION INFORMATION
RBB reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Fund's shares by making payment in whole or in part in securities chosen by RBB 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. RBB 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, RBB 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 the NYSE is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (RBB may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
The computation of the hypothetical offering price per Share of the Fund based on the value of the Fund's net assets on _________, 1998 and the Fund's Shares outstanding on such date is as follows:
SCHNEIDER SMALL CAP VALUE FUND
Net Assets..............................................
Outstanding Shares......................................
Net Asset Value per Share...............................
Maximum Offering Price to Public........................
VALUATION OF SHARES
The net asset value per share of the Fund is calculated as of the close of the NYSE, generally 4:00 p.m. Eastern Time on each Business Day. A "Business Day" is any day that the NYSE is open for business. 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 on the preceding Friday and subsequent Monday when one of these holidays falls on Saturday or Sunday. Net asset value per share, the value of an individual share in a fund, is computed by adding the value of the Fund's portfolio securities, cash and other assets, subtracting its actual and accrued liabilities, and dividing the result by the number of outstanding shares of the Fund. Securities that are listed on stock exchanges are valued at the last sale price on the day the securities are valued or, lacking any sales on such day, at the average closing bid. 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 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 average closing bid. 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 RBB'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.
In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by RBB's Board of Directors.
PERFORMANCE AND YIELD INFORMATION
TOTAL RETURN. The Fund may from time to time advertise its "average annual total return." The Fund computes such return separately for its 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
1, 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, when advertising its "aggregate total return," computes such returns 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.
TAXES
The following is only a summary of certain additional tax considerations generally affecting the Fund and its shareholders that are not described in the Prospectus. No
attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning. Investors are urged to consult their tax advisers with specific reference to their own tax situation.
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 that it distributes to shareholders, provided that it distributes an amount equal to the sum of (a) at least 90% of its investment company taxable income (net taxable investment income and the excess of net short-term capital gain over net long-term capital loss, if any, for the year) and (b) at least 90% of its net tax-exempt interest income, if any, for the year (the "Distribution Requirement") and satisfies certain other requirements of the Code that are described below. Distributions of investment company taxable income made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year will satisfy the Distribution Requirement.
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").
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 Fund 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 net capital gain (excess of net long-term capital gain over net short-term capital loss), if any, for each taxable year. Such gain is distributed as a capital gain dividend and is taxable to shareholders as mid-term or other long-term capital gain, regardless of the length of time the shareholder has held his shares, whether such gain was recognized by the Fund prior to the date on which a shareholder acquired shares of the Fund and whether the distribution was paid in cash or reinvested in shares. The aggregate amount of distributions designated by 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 capital loss or 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 Fund to shareholders not later than 60 days after the close of the Fund's taxable year.
In the case of corporate shareholders, distributions (other than capital gain dividends) of the Fund for any taxable year generally qualify for the dividends received deduction 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" if it has been received from a domestic corporation. Distributions of net investment income received by the Fund from investments in debt securities will be taxable to shareholders as ordinary income and will not be treated as "qualifying dividends" for purposes of the dividends received deduction. The Fund 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 Fund to corporate shareholders not later than 60 days after the close of the Fund's taxable year.
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.
A shareholder will recognize gain or loss upon a redemption of shares or an exchange of shares of the Fund for shares of another Fund upon exercise of the exchange privilege, to the extent of any difference between the price at which the shares are redeemed or exchanged and the price or prices at which the shares were originally purchased for cash.
The Code imposes a non-deductible 4% excise tax on regulated investment companies that do not distribute with respect to each calendar year an amount equal to 98% of their ordinary income for the calendar year plus 98% of their capital gain net income for the 1-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. 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 Fund will be required in certain cases to withhold and
remit to the United States Treasury 31% of dividends paid to any shareholder (1)
who has provided either an incorrect tax identification number or no number at
all, (2) who is subject to backup withholding by the Internal Revenue Service
for failure to report the receipt of interest or dividend income properly, or
(3) who has failed to certify to the Fund that he is not subject to backup
withholding or that he is an "exempt recipient."
The foregoing general discussion of federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Although the 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.
ADDITIONAL INFORMATION CONCERNING RBB SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which ___ billion shares are currently classified. In common classes as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (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 Stook (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 (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 Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares are classified as Class WW Common Stock (Boston Partners Investor Bond), 50 million shares 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 Small Cap Value), 100 million shares are classified as Class ZZ Common Stock (BEA Institutional Long-Short Market Neutral), 100 million shares of Class AAA Common Stock (BEA Advisor Long-Short Market Neutral), 100 million shares are classified as Class BBB Common Stock (BEA Institutional Long-Short Equity), 100 million shares of Class CCC Common Stock (BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD Common Stock (Boston Partners Institutional Micro Cap), 100 million shares are classified as Class EEE Common Stock (Boston Partners Investors Micro Cap), 100 million shares are classified as Class FFF Common Stock (BEA Institutional 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), 100 million shares are classified as Class III Common Stock (Boston Partners Institutional Market Neutral), 100 million shares are classified as Class JJJ Common Stock (Boston Partners Investor Market Neutral), 100 million shares are classified as Class KKK Common Stock (Boston Partners Institutional Long-Short Equity) 100 million shares are classified as Class LLL common stock (Boston Partners Investor Long-Short Equity), 100 million shares are classified as Class MMM Common Stock (n/i Small Cap Value), 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 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 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),700 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 (Governmnent 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 III and JJJ Common Stock constitute the Boston Partners Market Neutral Fund Institutional and Investor classes, respectively. Shares of the Class KKK and LLL Common Stock constitute the Boston Partners Long-Short Equity Fund Institutional and Investor classes, respectively. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate "families": the RBB Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Principal (Gamma) Family, the Janney Montgomery Scott Money Family, the Select (Beta) Family, the Schneider Capital Management Family, the n/i numeric investors family of funds, the Boston Partners Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in the Government Securities Portfolio; the Cash Preserveration Family represents interests in the Government Securities Portfolio; the Cash Preservation Family represent interests in the Money Market and Municipal Money Market Portfolios; the Sansom Street Family represents interest in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the n/i numeric investors family of funds represents interest in five non-money market portfolios; the Boston Partners Family represents interest in six non-money market portfolios; the Schneider Capital Management Family represents interest in one non-money market portfolio; the Janney Montgomery Scott Family, the Select (Beta) Family, the Principal (Gamma) Family and the 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.
RBB does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. RBB's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of RBB 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, RBB will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of the Fund will vote in the aggregate on all matters. Further, shareholders of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of the 1940 Act or applicable state law, or otherwise, to the holders of the outstanding securities of an investment company such as RBB shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities, as defined in the 1940 Act, of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under Rule 18f-2, 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, as defined in the 1940 Act, of such portfolio. However, Rule 18f-2 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 RBB's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law, or by RBB's Articles of Incorporation, RBB 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 entitled to vote on the matter 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 RBB and the non-interested directors.
INDEPENDENT ACCOUNTANTS. [ ] serves as RBB's
independent accountants.
CONTROL PERSONS. As of _________, 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.
------------------------------------ ------------------------------------------------ -------------------------------
FUND NAME SHAREHOLDER NAME AND ADDRESS PERCENTAGE OF FUND HELD
------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY - Employees Ret Plan Marshfield Clini 7.18%
INSTITUTIONAL 1000 N. Oak Avenue
Marshfield, WI 54449-5772
------------------------------------ ------------------------------------------------ -------------------------------
Indiana University Foundation 5.02%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - Wachovia Bank North Carolina 68.43%
INSTITUTIONAL Trust Carolina Power & Light Co. Supplemental
Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
------------------------------------ ------------------------------------------------ -------------------------------
Clariden Bank 10.35%
Clariden Str. 26
CH-8002 Zurich
Switzerland
------------------------------------ ------------------------------------------------ -------------------------------
National Academy of Sciences 8.02%
2101 Constitution Ave. NW
Washington, DC 20418-0006
------------------------------------ ------------------------------------------------ -------------------------------
Community Foundation Palm Bea 6.99%
Martin Counties Inc.
324 Datura St /#340
West Palm Beach, FL 33401-5420
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT MARKET NEUTRAL - Michael A. Wall TTEE 75.92%
INSTITUTIONAL Michael A. Wall Trust
U/A DTD 12/29/1997
P.O. Box 4579
Jackson, WY 83001-4579
------------------------------------ ------------------------------------------------ -------------------------------
CS First Boston Inc. 16.00%
c/o Nancy Faiese
55 E 52nd St 27th Flr
New York, NY 10055-0002
------------------------------------ ------------------------------------------------ -------------------------------
C Richard Wilson 5.35%
2876 Parkview Cir
Emmaus, PA 18049-1217
------------------------------------ ------------------------------------------------ -------------------------------
BEA LONG-SHORT EQUITY - William W. Priest 100.00%
INSTITUTIONAL 2 E 70th St #5
New York, NY 10021-4913
------------------------------------ ------------------------------------------------ -------------------------------
BEA SELECT ECONOMIC VALUE EQUITY Patterson & Co. 90.54%
-INSTITUTIONAL P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
BEA Associates 5.45%
FAO Pension Trust
153 E. 53rd St.
New York, NY 10022-4611
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE EQUITY - Werner & Pfleiderer Pension Plan 10.02%
INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
------------------------------------ ------------------------------------------------ -------------------------------
Credit Suisse Private Banking Dividend 7.52%
Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
Washington Hebrew Congregation 10.91%
3935 Macomb St., NW
Washington, DC 20016-3799
------------------------------------ ------------------------------------------------ -------------------------------
Fleet National Bank Trst. 8.63%
Hospital St. Raphael Self Insur Tr
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.94%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 6.72%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
Sema & Co. 5.77%
12 E. 49th St. - Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA U.S. CORE FIXED INCOME - The Northern Trust Company TTEE 12.83%
INSTITUTIONAL Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224
------------------------------------ ------------------------------------------------ -------------------------------
Winifred Masterson Burke Foundation 6.12%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
------------------------------------ ------------------------------------------------ -------------------------------
New England UFCW & Employers' Pension Fund 11.89%
Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institution 5.41%
Operations Co Inc (FIIOC) As Agent
For Credit Suisse First Boston
Employees Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA STRATEGIC GLOBAL FIXED INCOME Sunkist Master Trust 53.09%
FUND 14130 Riverside Dr.
Sherman Oaks, CA 91423-2392
------------------------------------ ------------------------------------------------ -------------------------------
Patterson & Co. 37.27%
P.O. Box 7829
Philadelphia, PA 19101-7829
------------------------------------ ------------------------------------------------ -------------------------------
State St. Bank & Trust TTEE 5.52%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD - INSTITUTIONAL Carl F Besenbach 18.90%
Trst Michelin North America Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
------------------------------------ ------------------------------------------------ -------------------------------
Southdown Inc. Pension Pl 9.89%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3l98
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
Edward J. Demske TTEE 5.57%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
------------------------------------ ------------------------------------------------ -------------------------------
Fidelity Investments Institutional Operations 16.96%
Co. Inc. as Agent for Certain Employee
Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO A/C CSBF8605082 5.33%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
BEA MUNI BOND - INSTITUTIONAL Arnold Leon 12.56%
c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
------------------------------------ ------------------------------------------------ -------------------------------
William A. Marquard 35.95%
2199 Maysville Rd.
Carlisle, KY 40311-9716
------------------------------------ ------------------------------------------------ -------------------------------
Leo Bogart 5.20%
135 Central Park West 9N
New York, NY 10023-2465
------------------------------------ ------------------------------------------------ -------------------------------
Howard Isermann 8.84%
9 Tulane Dr.
Livingston, NJ 07039-6212
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
BEA INT'L EQUITY -ADVISOR TRANSCORP 5.87%
FBO William E Burns
P.O. Box 6535
Englewood, CO 80155-6535
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 42.06%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Bob & Co. 47.48%
P.O. Box 1809
Boston, MA 02105-1809
------------------------------------ ------------------------------------------------ -------------------------------
BEA EMERGING MARKETS EQUITY - SEMA & Co. 98.34%
ADVISOR 12E 49th St. Fl. 41
New York, NY 10017-1028
------------------------------------ ------------------------------------------------ -------------------------------
BEA GLOBAL TELE- COMMUNICATIONS E. M. Warburg Pincus & Co. Inc. 16.31%
-ADVISOR Attn: Sandra Correale
466 Lexington Ave.
New York, NY 10017-3140
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. 20.25%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
FTC & Co. 22.50%
Attn: Datalynx # B48
P.O. Box 173736
Denver, CO 80217-3736
------------------------------------ ------------------------------------------------ -------------------------------
BEA HIGH YIELD -ADVISOR Charles Schwab & Co. 82.87%
Special Custody Account for the Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
------------------------------------ ------------------------------------------------ -------------------------------
Richard A. Wilson TTEE 14.41%
E. Francis Wilson TTEE
The Wilson Family Trust
U/A 11/1/95
7612 March Ave.
West Hills, CA 91304-5232
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATION MONEY MARKET Jewish Family and Children's Agency of Phil 44.107%
Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
------------------------------------ ------------------------------------------------ -------------------------------
Marian E. Kunz 11.073%
52 Weiss Ave.
Flourtown, PA 19031
------------------------------------ ------------------------------------------------ -------------------------------
Dominic & Barbara Pisciotta 5.737%
And Successors In Tr Under The Dominic TRST &
Barbara Pisciotta Caring TR DTD
01/24/92
207 Woodmere Way
St. Charles, ,MO 63303
------------------------------------ ------------------------------------------------ -------------------------------
Betty L. Thomas 5.046%
TRST Thomas Living Trust
DTD 06/19/92
838 Lynn Haven Lane
Hazelwood, MO 63042-3415
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
SAMSON STREET MONEY MARKET Saxon and Co. 77.306%
FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
------------------------------------ ------------------------------------------------ -------------------------------
Wasner & Co. for Account of 22.019%
Paine Webber and Managed Assets Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
------------------------------------ ------------------------------------------------ -------------------------------
CASH PRESERVATOIN Gary L. Lange 39.455%
MUNICIPAL MONEY MARKET and Susan D. Lange
JT TEN
837 Timber Glen Ln
Ballwin, MO 63021-6066
------------------------------------ ------------------------------------------------ -------------------------------
Andrew Diederich and 5.145%
Doris Diederich
JT TEN
1003 Lindeman
Des Peres, MO 63131
------------------------------------ ------------------------------------------------ -------------------------------
Kenneth Farwell 7.102%
and Valerie Farwell JT TEN
3854 Sullivan
St. Louis, MO 63107
------------------------------------ ------------------------------------------------ -------------------------------
Terry H. Williams 14.050%
and Nancy L. Williams
JT TEN
2508 Janel Ct
Oakville, MO 63129
------------------------------------ ------------------------------------------------ -------------------------------
Emil R. Hunter and 8.181%
Mary J. Hunter JT TEN
428 W. Jefferson
Kirkwood, MO 63122
------------------------------------ ------------------------------------------------ -------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 13.421%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds A/C 3143-0251
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Janis Claflin, Bruce Fetzer and 5.339%
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 7.486%
1001 19th St., N. 16th Flr.
Arlington, VA 22209
------------------------------------ ------------------------------------------------ -------------------------------
Portland General Holdings Inc. 19.383%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
------------------------------------ ------------------------------------------------ -------------------------------
State Street Bank and Trust Company 8.675%
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
------------------------------------ ------------------------------------------------ -------------------------------
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------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH FUND Charles Schwab & Co. Inc 19.210%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Citibank North America Inc. 21.280%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
Mutual Fund Unit
Bld. B Floor 1 Zone 7
3800 Citibank Center Tampa
Tampa, FL 33610-9122
------------------------------------ ------------------------------------------------ -------------------------------
U.S. Equity Investment Portfolio LP 6.376%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.623%
Trst Sunkist Growers-Match-Svgs Pln
Trst No. 610001154-03
Mutual Funds Dept. P.O. Box 109
San Diego, CA 92112
------------------------------------ ------------------------------------------------ -------------------------------
N/I GROWTH AND VALUE FUND Charles Schwab & Co. Inc. 20.931%
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. 8.318%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
Bankers Trust Cust Pge-Enron Foundation 5.701%
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
------------------------------------ ------------------------------------------------ -------------------------------
N/I LARGER CAP VALUE FUND Charles Schwab & Co. Inc 15.403%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Bank of America NT & SA 17.438%
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
------------------------------------ ------------------------------------------------ -------------------------------
The John E. Fetzer Institute, Inc. 46.101%
Attn. Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND Dr. Janice B. Yost 12.283%
INST SHARES Trst Mary Black Foundation Inc.
Bell Hill - 945 E. Main St.
Spartanburg, SC 2930
2
------------------------------------ ------------------------------------------------ -------------------------------
US Bank National Association 10.762%
FBO A-DEC Inc DOT 093098
Attn: Mutual Funds a/c 97307536
PO Box 64010
St. Paul, MN 55164-0010
------------------------------------ ------------------------------------------------ -------------------------------
Irving Fireman's Relief & Ret Fund 5.778%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
------------------------------------ ------------------------------------------------ -------------------------------
Miter & Co. 10.214%
c/o M&I Trust
PO Box 2977
Milwaukee, WI 53202
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
Union Bank of California 5.680%
FBO Service Employers
TR610001265-01
PO Box 120109
San Diego, CA 92112-0109
------------------------------------ ------------------------------------------------ -------------------------------
Swanee Hunt and Charles Ansbacher 5.943%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS LARGE CAP FUND National Financial Services Corp. 17.390%
INVESTOR SHARES For the Exclusive Bene of Our Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 73.492%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND Donaldson Lufkin & Jenrette 9.538%
INST. SHARES Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
The Northern Trust Company 13.721%
FBO Thomas & Betts Master
Retirement Trust
8155 T&B Blvd
Memphis, TN 38123
------------------------------------ ------------------------------------------------ -------------------------------
John Carroll University 5.597%
20700 N. Park Blvd.
University Heights, OH 44118
------------------------------------ ------------------------------------------------ -------------------------------
MAC & CO. 7.890%
A/C BPHF 3006002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
------------------------------------ ------------------------------------------------ -------------------------------
ISTCO 5.610%
P.O. Box 523
Belleville, IL 62222-0523
------------------------------------ ------------------------------------------------ -------------------------------
Coastal Insurance Enterprises Inc. 7.216%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery, AL 36124
------------------------------------ ------------------------------------------------ -------------------------------
U P Plumbers & Pipefitters 6.058%
Pension Fund
c/o James E. Schreiber Admin Manager
241 E. Saginaw St Ste 601
East Lansing, MI 48823-2791
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS MID CAP VALUE FUND National Financial Svcs Corp. for Exclusive 15.320%
INV SHARES Bene of Our Customers
Sal Vella
200 Liberty St.
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Charles Schwab & Co. Inc. 40.652%
Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Jupiter & Co. 5.607%
c/o Investors Bank
P.O. Box 9130 FPG 90
Boston, MA 02110
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND Boston Partners Asset Mgmt LP 35.132%
INSTITUTIONAL SHARES One Financial Center 43rd Fl.
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Chiles Foundation 23.181%
111 S.W. Fifth Ave.
Ste 4050
Portland, OR 97204
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 33.731%
Raleigh, NC
General Endowment
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
The Roman Catholic Diocese of 7.921%
Raleigh, NC
Clergy Trust
715 Nazareth St.
Raleigh, NC 27606
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS BOND FUND INVESTOR Charles Schwab & Co. Inc 77.057%
SHARES Special Custody Account for Bene of Cust
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
------------------------------------ ------------------------------------------------ -------------------------------
Donaldson Lufkin & Jenrette 5.014%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
------------------------------------ ------------------------------------------------ -------------------------------
Stephen W. Hamilton 15.288%
17 Lakeside Ln
N. Barrington, IL 60010
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS Desmond J. Heathwood 8.415%
MICRO CAP VALUE 41 Chestnut St.
FUND- INSTITUTIONAL Boston, MA 02108
SHARES
------------------------------------ ------------------------------------------------ -------------------------------
Boston Partners Asset Mgmt LP 66.568%
One Financial Center
43rd Floor
Boston, MA 02111
------------------------------------ ------------------------------------------------ -------------------------------
Wayne Archambo 6.690%
42 DeLopa Cir
Westwood, MA 02090
------------------------------------ ------------------------------------------------ -------------------------------
David M. Dabora 6.690%
11 White Plains Ct.
San Anselmo, CA 94960
------------------------------------ ------------------------------------------------ -------------------------------
|
------------------------------------ ------------------------------------------------ -------------------------------
BOSTON PARTNERS National Financial Services Corp. 41.537%
MICRO CAP VALUE For the Exclusive Bene of our Customers
FUND- INVESTOR Attn. Mutual Funds 5th Floor
SHARES 200 Liberty St.
1 World Financial Center
New York, NY 10281
------------------------------------ ------------------------------------------------ -------------------------------
Scott J. Harrington 52.711%
54 Torino Ct.
Danville, CA 94526
------------------------------------ ------------------------------------------------ -------------------------------
SCHNEIDER SMALL CAP VALUE FUND Arnold C. Schneider III 44.637%
SEP IRA
826 Turnbridge Rd
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
SCM Retirement Plan 20.853%
Profit Sharing Plan
460 E. Swedesford Rd
Ste 1080
Wayne, PA 19087
------------------------------------ ------------------------------------------------ -------------------------------
Durward A. Huckabay 14.322%
and Susan S. Huckabay
TRST Huckabay 1987 Trust
U/A DTD 11/6/87
2531 Lakeridge Shores Cir
Reno, NV 89509
------------------------------------ ------------------------------------------------ -------------------------------
Ronald L. Gault 13.586%
IRA
439 W. Nelson St
Lexington, VA 24450
------------------------------------ ------------------------------------------------ -------------------------------
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As of the above date, directors and officers as a group owned less than one percent of the shares of the Company.
APPENDIX A
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" - The highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
"A-2" - Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
"B" - Issues are regarded as having only a speculative capacity for timely payment.
"C" - This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
"D" - Issues are in payment default. The "D" rating category is used when interest payments of principal payments 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.
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 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 effects 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 following summarizes the ratings used by Standard & Poor's for corporate debt:
"AAA" - This designation represents 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.
"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 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" - 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.
(P)... - When applied to forward delivery bonds, indicates that the rating is provisional pending delivery of the bonds. The rating may be revised prior to delivery if changes occur in the legal documents or the underlying credit quality of the bonds.
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.
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(b) Exhibits:
(1) (a) Articles of Incorporation of Registrant *1
(b) Articles Supplementary of Registrant. *1
(c) Articles of Amendment to Articles of
Incorporation of Registrant. *2
(d) Articles Supplementary of Registrant. *2
(e) Articles Supplementary of Registrant *5
(f) Articles Supplementary of Registrant. *6
(g) Articles Supplementary of Registrant. *9
(h) Articles Supplementary of Registrant. *10
(i) Articles Supplementary of Registrant. *11
(j) Articles Supplementary of Registrant. *11
(k) Articles Supplementary of Registrant. *13
(l) Articles Supplementary of Registrant. *13
(m) Articles Supplementary of Registrant. *13
(n) Articles Supplementary of Registrant. *13
(o) Articles Supplementary of Registrant. 14
(p) Articles Supplementary of Registrant. 17
(q) Articles Supplementary of Registrant. 19
(r) Articles Supplementary of Registrant. 21
(s) Articles of Amendment to Charter of the 22
Registrant.
(t) Articles Supplementary of Registrant. 22
(u) Articles Supplementary of Registrant. 27
(v) Articles Supplementary of Registrant. 29
|
(2) (a) By-Laws, as amended. 22
(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 17
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 *3
Money Market) between Registrant and
Provident Institutional Management
Corporation, dated as of August 16, 1988.
(d) Sub-Advisory Agreement (Tax-Free Money *3
Market) between Provident Institutional
Management Corporation and Provident National
Bank, dated as of August 16, 1988.
(e) Investment Advisory Agreement *3
(Government Obligations Money Market) between
Registrant and Provident Institutional
Management Corporation, dated as of
August 16, 1988.
(f) Sub-Advisory Agreement (Government *3
Obligations 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 *10
Money Market) between Registrant and
Provident Institutional Management
Corporation dated April 21, 1992.
(j) Investment Advisory Agreement (n/i Micro Cap 17
Fund) between Registrant and Numeric
Investors, L.P.
|
(l) Investment Advisory Agreement (n/i Growth 17 & Value Fund) between Registrant and Numeric Investors, L.P.
(m) Investment Advisory Agreement (Boston 20 Partners Large Cap Value Fund) between Registrant and Boston Partners Asset Management, L.P.
(n) Investment Advisory Agreement (Boston 22 Partners Mid Cap Value Fund) between Registrant and Boston Partners Asset Management, L.P.
(o) Investment Advisory Agreement (n/i Larger 24 Cap Value Fund) between Registrant and Numeric Investors, L.P. dated December 1, 1997.
(p) Investment Advisory Agreement (Boston 24 Partners Bond Fund) between Registrant and Boston Partners Asset Management, L.P. dated December 1, 1997.
(q) Investment Advisory Agreement (Schneider 29 Capital Management Value Fund) between Registrant and Schneider Capital Management Company.
(r) Investment Advisory Agreement (Boston 29 Partners Micro Cap Value Fund) between Registrant and Boston Partners Asset Management, L.P.
(s) Form of Investment Advisory Agreement 27
(Boston Partners Market Neutral Fund) between
Registrant and Boston Partners Asset
Management, L.P.
(t) Form of Investment Advisory Agreement 27
(Boston Partners Long-Short Equity Fund)
between Registrant and Boston Partners Asset
Management, L.P.
(u) Form of Investment Advisory Agreement 28
(n/i Small Cap Value Fund) between Registrant
and Numeric Investors, LP.
(6) (a) Distribution Agreement between Registrant 26
and Provident Distributors, Inc. dated as of
May 29, 1998.
(b) Form of Distribution Agreement Supplement 27
between Registrant and Provident
Distributors, Inc.(Boston Partners Market
Neutral Fund - Institutional Class).
(c) Form of Distribution Agreement Supplement 27
between Registrant and Provident
Distributors, Inc. (Boston Partners Market
Neutral Fund - Investor Class).
(d) Form of Distribution Agreement Supplement 27
between Registrant and Provident
Distributors, Inc.(Boston Partners Long-
Short Equity Fund-Institutional Class).
(e) Form of Distribution Agreement Supplement 27
between Registrant and Provident
Distributors, Inc. (Boston Partners
Long-Short Equity Fund-Investor Class).
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SEE NOTE #
----------
(b) Exhibits:
(f) Form of Distribution Agreement Supplement 28
between Registrant and Provident
Distributors, Inc. (n/i Small Cap Value Fund).
(7) Fund Office Retirement Profit-Sharing and Trust Agreement, dated as of 23
October 24, 1990, as amended.
(8) (a) Custodian Agreement between Registrant and Provident *3
National Bank dated as of August 16, 1988.
(b) Sub-Custodian Agreement among The Chase Manhattan *10
Bank, N.A., the Registrant and Provident
National Bank, dated as of July 13, 1992, relating
to custody of Registrant's foreign securities.
(c) Amendment No. 1 to Custodian Agreement dated August 16, 1988. *9
(d) Custodian Contract between Registrant and State Street Bank and *12
Trust Company.
(e) Custody Agreement between Registrant and Custodial Trust 17
Company on behalf of n/i Micro Cap Fund, n/i Growth Fund and
n/i Growth & Value Fund Portfolios of the Registrant.
(f) Custodian Agreement Supplement Between Registrant
and PNC 20 Bank, National Association dated October
16, 1996.
(g) Custodian Agreement Supplement between Registrant and PNC 22
Bank, National Association, on behalf of the Boston Partners Mid
Cap Value Fund.
(h) Custody Agreement between Registrant and Custodial Trust 24
Company on behalf of the n/i Larger Cap Value Fund.
(i) Custodian Agreement Supplement between Registrant
and PNC 24 Bank, N.A. on behalf of the Boston
Partners Bond Fund.
(j) Custodian Agreement Supplement between Registrant and PNC Bank, 29
N.A. on behalf of the Schneider Capital Management Value Fund.
(k) Custodian Agreement Supplement between Registrant
and PNC Bank, 29 N.A. on behalf of the Boston
Partners Micro Cap Value Fund.
(l) Form of Custodian Agreement Supplement between Registrant 27
and PNC Bank, N.A. on behalf of Boston Partners Market Neutral
Fund.
(m) Form of Custodian Agreement Supplement between Registrant 27
and PNC Bank, N.A. on behalf of Boston Partners Long-Short Equity
Fund.
(n) Form of Custodian Agreement Supplement between
Registrant 28 and Custodial Trust Company on behalf
of n/i Small Cap Value Fund.
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SEE NOTE #
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(b) Exhibits:
(9) (a) Transfer Agency Agreement (Sansom Street) between *3
Registrant and Provident Financial Processing Corporation,
dated as of August 16, 1988.
(b) Transfer Agency Agreement (Cash Preservation) between *3
Registrant and Provident Financial Processing Corporation, dated
as of August 16, 1988.
(c) Shareholder Servicing Agreement (Sansom Street Money Market). *3
(d) Shareholder Servicing Agreement (Sansom Street Tax-Free Money *3
Market).
(e) Shareholder Servicing Agreement (Sansom Street Government *3
Obligations Money Market).
(f) Shareholder Services Plan (Sansom Street Money Market). *3
(g) Shareholder Services Plan (Sansom Street Tax-Free Money Market). *3
(h) Shareholder Services Plan (Sansom Street Government Obligations *3
Money Market).
(i) Transfer Agency Agreement (Bedford) between Registrant and *3
Provident Financial Processing Corporation, dated as of August 16,
1988.
(j) Administration and Accounting Services Agreement *8
between Registrant and Provident Financial
Processing Corporation, relating to Government
Securities Portfolio, dated as of April 10, 1991.
(k) Administration and Accounting Services Agreement *9
between Registrant and Provident Financial
Processing Corporation, relating to New York
Municipal Money Market Portfolio dated as of
November 5, 1991.
(l) Transfer Agency Agreement and Supplements (Bradford, *9
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.
(m) Administration and Accounting Services Agreement *10
between Registrant and Provident Financial
Processing Corporation, relating to Tax-Free Money
Market Portfolio, dated as of April 21, 1992.
(n) Transfer Agency and Service Agreement between 15
Registrant and State Street Bank and Trust
Company and PFPC, Inc. dated February 1, 1995.
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SEE NOTE #
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(b) Exhibits:
(o) Supplement to Transfer Agency and Service Agreement between 15
Registrant, State Street Bank and Trust Company, Inc. and PFPC
dated April 10, 1995.
(p) Amended and Restated Credit Agreement dated December 15, 1994. 16
(q) Transfer Agency Agreement Supplement (n/i Micro Cap Fund, n/i 17
Growth Fund and n/i Growth & Value Fund) between Registrant and
PFPC, Inc. dated April 14, 1996.
(r) Administration and Accounting Services Agreement 17
between Registrant and PFPC, Inc. (n/i Micro Cap
Fund) dated April 24, 1996.
(s) Administration and Accounting Services Agreement between Registrant 17
and PFPC, Inc. (n/i Growth Fund) dated April 24, 1996.
(t) Administration and Accounting Services Agreement 17
between Registrant and PFPC, Inc. (n/i Growth &
Value Fund) dated April 24, 1996.
(u) Transfer Agreement and Service Agreement between Registrant and 18
State Street Bank and Trust Company.
(v) Administration and Accounting Services Agreement between the 21
Registrant and PFPC Inc. dated October 16, 1996 (Boston Partners
Large Cap Value Fund).
(w) Transfer Agency Agreement Supplement between Registrant and PFPC 20
Inc. (Boston Partners Large Cap Value Fund, Institutional Class).
(x) Transfer Agency Agreement Supplement between Registrant and PFPC 20
Inc. (Boston Partners Large Cap Value Fund, Investor Class).
(y) Transfer Agency Agreement Supplement between Registrant and PFPC 20
Inc. (Boston Partners Large Cap Value Fund, Advisor Class).
(z) Transfer Agency Agreement Supplement between 22
Registrant and PFPC Inc., (Boston Partners Mid
Cap Value Fund, Institutional Class).
(aa) Transfer Agency Agreement Supplement between Registrant and PFPC 22
Inc., (Boston Partners Mid Cap Value Fund, Investor Class).
(bb) Administration and Accounting Services Agreement between Registrant 22
and PFPC Inc. dated, May 30, 1997 (Boston Partners Mid Cap Value
Fund).
(cc) Transfer Agency Agreement Supplement (n/i Larger Cap Value Fund) 24
between Registrant and PFPC, Inc. dated December 1, 1997.
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SEE NOTE #
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(b) Exhibits:
(dd) Administration and Accounting Services Agreement between Registrant 24
and PFPC, Inc. dated December 1, 1997 (n/i Larger Cap Value Fund).
(ee) Co-Administration Agreement between Registrant and Bear Stearns 24
Funds Management, Inc. dated December 1, 1997 (n/i Larger Cap Value
Fund).
(ff) Transfer Agency Agreement Supplement between Registrant and PFPC, 24
Inc. dated December 1, 1997 (Boston Partners Bond Fund,
Institutional Class).
(gg) Transfer Agency Agreement Supplement between Registrant and PFPC, 24
Inc. dated December 1, 1997 (Boston Partners Bond Fund, Investor
Class).
(hh) Administration and Accounting Services Agreement between Registrant 24
and PFPC, Inc. dated December 1, 1997 (Boston Partners Bond Fund).
(ii) Administration and Accounting Services Agreement between Registrant 29
and PFPC Inc. (Schneider Capital Management Value Fund).
(jj) Transfer Agency Agreement Supplement between Registrant and PFPC 29
Inc. (Schneider Capital Management Value Fund).
(kk) Transfer Agency Agreement Supplement between Registrant and PFPC, 29
Inc. (Boston Partners Micro Cap Value Fund, Institutional Class).
(ll) Transfer Agency Agreement Supplement between Registrant and PFPC, 29
Inc. (Boston Partners Micro Cap Value Fund, Investor Class).
(mm) Administration and Accounting Services Agreement between Registrant 29
and PFPC, Inc. (Boston Partners Micro Cap Value Fund).
(nn) Administrative Services Agreement between Registrant and Provident 26
Distributors, Inc. dated as of May 29, 1998 and relating to the
n/i funds, Schneider Small Cap Value Fund, and Institutional
Shares of the Boston Partners Funds.
(oo) Form of Administrative Services Agreement Supplement 27
between Registrant and Provident Distributors, Inc. relating to the
Boston Partners Market Neutral Fund (Institutional Class).
(pp) Form of Administrative Services Agreement Supplement 27
between Registrant and Provident Distributors, Inc. relating to the
Boston Partners Long-Short Equity Fund (Institutional Class).
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SEE NOTE #
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(b) Exhibits:
(qq) Form of Administrative and Accounting Services Agreement between 27
Registrant and PFPC, Inc. (Boston Partners Market Neutral Fund -
Institutional and Investor Classes).
(rr) Form of Administrative and Accounting Services Agreement between 27
Registrant and PFPC, Inc. (Boston Partners Long-Short Equity Fund -
Institutional and Investor Classes).
(ss) Form of Transfer Agency Agreement Supplement between Registrant and 27
PFPC, Inc. (Boston Partners Market Neutral Fund - Institutional and
Investor Classes).
(tt) Form of Transfer Agency Agreement Supplement between Registrant and 27
PFPC, Inc. (Boston Partners Long-Short Equity Fund - Institutional
and Investor Classes).
(uu) Form of Transfer Agency Agreement Supplement between Registrant and 28
PFPC, Inc. (n/i Small Cap Value Fund).
(vv) Form of Administration and Accounting Services Agreement between 28
Registrant and PFPC, Inc. (n/i Small Cap Value Fund).
(ww) Form of Co-Administration Agreement between Registrant and Bear 28
Stearns Funds Management, Inc. (n/i Small Cap Value Fund).
(xx) Form of Administrative Services Agreement between Registrant and 28
Provident Distributors, Inc. (n/i Small Cap Value Fund).
(10) To be filed by Amendment. ***
(11) (a) To be filed by Amendment. ***
(b) Consent of Drinker Biddle & Reath LLP. **
(12) None.
(13) (a) Subscription Agreement (relating to Classes A through N). 2
(b) Subscription Agreement between Registrant and Planco 7
Financial *7 Services, Inc., relating to Classes O
and P.
(c) Subscription Agreement between Registrant and Planco Financial 7
Services, Inc., relating to Class Q.
(d) Subscription Agreement between Registrant and Counsellors 9
Securities Inc. relating to Classes R, S, and Alpha 1 through Theta
4.
(e) Purchase Agreement between Registrant and Numeric Investors, L.P. 17
relating to Class FF (n/i Micro Cap Fund).
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SEE NOTE #
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(b) Exhibits:
(f) Purchase Agreement between Registrant and Numeric Investors, L.P. 17
relating to Class GG (n/i Growth Fund).
(g) Purchase Agreement between Registrant and Numeric Investors, L.P. 17
relating to Class HH (n/i Growth & Value Fund).
(h) Purchase Agreement between Registrant and Boston Partners Asset 21
Management, L.P. relating to Classes QQ, RR and SS (Boston Partners
Large Cap Value Fund).
(i) Purchase Agreement between Registrant and Boston Partners Asset 22
Management, L.P. relating to Classes TT and UU (Boston Partners Mid
Cap Value Fund).
(j) Purchase Agreement between Registrant and Boston Partners Asset 24
Management L.P.relating to Classes VV and WW (Boston Partners Bond
Fund).
(k) Purchase Agreement between Registrant and Numeric Investors, L.P. 24
relating to Class XX (n/i Larger Cap Value Fund).
(l) Purchase Agreement between Registrant and Schneider Capital 29
Management Company relating to Class YY Schneider Small Cap Value
Fund).
(m) Purchase Agreement between Registrant and Boston Partners Asset 29
Management, L.P. relating to Classes DDD and EEE (Boston Partners
Micro Cap Value Fund).
(n) Form of Purchase Agreement between Registrant and Boston Partners 27
Asset Management, L.P. relating to Classes III and JJJ (Boston
Partners Market Neutral Fund).
(o) Form of Purchase Agreement between Registrant and Boston Partners 27
relating to Classes KKK and LLL (Boston Partners Long-Short Equity
Fund).
(p) Form of Purchase Agreement between Registrant and Provident 28
Distributors, Inc. relating to Class MMM (n/i Small Cap Value Fund).
(14) None.
(15) (a) Plan of Distribution (Sansom Street Money Market). *3
(b) Plan of Distribution (Sansom Street Tax-Free Money Market). *3
(c) Plan of Distribution (Sansom Street Government Obligations Money *3
Market).
(d) Plan of Distribution (Cash Preservation Money). *3
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SEE NOTE #
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(b) Exhibits:
(e) Plan of Distribution (Cash Preservation Tax-Free Money Market). *3
(f) Plan of Distribution (Bedford Money Market). *3
(g) Plan of Distribution (Bedford Tax-Free Money Market). *3
(h) Plan of Distribution (Bedford Government Obligations Money Market). *3
(i) Plan of Distribution (Income Opportunities High Yield). *7
(j) Amendment No. 1 to Plans of Distribution (Classes A through Q). *8
(k) Plan of Distribution (Alpha (now known as Janney) Money Market). *9
(l) Plan of Distribution (Alpha (now known as Janney)
Tax-Free Money *9 Market (now known as the Municipal
Money Market)).
(m) Plan of Distribution (Alpha (now known as Janney) Government *9
Obligations Money Market).
(n) Plan of Distribution (Alpha (now known as Janney) New York *9
Municipal Money Market).
(o) Plan of Distribution (Beta Tax-Free Money Market). *9
(p) Plan of Distribution (Beta Government Obligations Money Market). *9
(q) Plan of Distribution (Beta New York Money Market). *9
(r) Plan of Distribution (Gamma Tax-Free Money Market). *9
(s) Plan of Distribution (Gamma Government Obligations Money Market). *9
(t) Plan of Distribution (Gamma New York Municipal Money Market). *9
(u) Plan of Distribution (Delta Money Market). *9
(v) Plan of Distribution (Delta Tax-Free Money Market). *9
(w) Plan of Distribution (Delta Government Obligations Money Market). *9
(x) Plan of Distribution (Delta New York Municipal Money Market) *9
(y) Plan of Distribution (Epsilon Money Market). *9
(z) Plan of Distribution (Epsilon Tax-Free Money Market). *9
(aa) Plan of Distribution (Epsilon Government Obligations Money Market) *9
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SEE NOTE #
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(b) Exhibits:
(bb) Plan of Distribution (Epsilon New York Municipal Money Market). *9
(cc) Plan of Distribution (Zeta Money Market). *9
(dd) Plan of Distribution (Zeta Tax-Free Money Market). *9
(ee) Plan of Distribution (Zeta Government Obligations Money Market). *9
(ff) Plan of Distribution (Zeta New York Municipal Money Market). *9
(gg) Plan of Distribution (Eta Money Market). *9
(hh) Plan of Distribution (Eta Tax-Free Money Market). *9
(ii) Plan of Distribution (Eta Government Obligations Money Market). *9
(jj) Plan at Distribution (Eta New York Municipal Money Market). *9
(kk) Plan of Distribution (Theta Money Market). *9
(ll) Plan of Distribution (Theta Tax-Free Money Market). *9
(mm) Plan of Distribution (Theta Government Obligations Money Market). *9
(nn) Plan of Distribution (Theta New York Municipal Money Market). *9
(oo) Plan of Distribution (Boston Partners Large Cap Value Fund Investor 21
Class).
(pp) Plan of Distribution (Boston Partners Large Cap Value Fund Advisor 21
Class).
(qq) Plan of Distribution (Boston Partners Mid Cap Value Fund Investor 21
Class).
(rr) Plan of Distribution (Boston Partners Bond Fund Investor Class). 24
(ss) Plan of Distribution (Boston Partners Micro Cap Value Fund Investor 25
Class).
(tt) Amendment to Plans of Distribution pursuant to Rule 12b-1. 27
(uu) Form of Plan of Distribution (Boston Partners Market Neutral 27
Fund - Investor Class).
(vv) Form of Plan of Distribution (Boston Partners Long-Short 27
Equity Fund - Investor Class).
(ww) Plan of Distribution (Principal Money Market). 29
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SEE NOTE #
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(b) Exhibits:
(16) (a) Schedule for Computation of Performance Quotations for the 23
Money Market and Boston Partners Portfolios.
(b) Schedule for Computation of Performance Quotations for the n/i 24
Portfolios.
(c) Schedule for Computation of Performance Quotations for the n/i ***
Larger Cap Value Fund.
(d) Schedule for Computation of Performance Quotations for the Boston ***
Partners Bond Fund.
(e) Schedule for Computation of Performance Quotations for the Boston ***
Partners Micro Cap Fund.
(17) Not applicable.
(18) Amended 18F-3 Plan. 29
(27) To be filed by Amendment. ***
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1 Incorporated herein by reference to Registrant's Registration Statement (No. 33-20827) filed on March 24, 1988.
2 Incorporated herein by reference to Pre-Effective Amendment No. 2 to Registrant's Registration Statement (No. 33-20827) filed on July 12, 1988.
3 Incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement (No. 33-20827) filed on March 23, 1989.
4 Incorporated herein by reference to Post-Effective Amendment No. 2 to Registrant's Registration Statement (No. 33-20827) filed on October 25, 1989.
5 Incorporated herein by reference to 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 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 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 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 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 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 Post-Effective Amendment No. 13 to the Registrant's Registration Statement (No. 33-20827) filed on October 29, 1993.
12 Incorporated herein by reference to Post-Effective Amendment No. 21 to the Registrant's Registration Statement (No. 33-20827) filed on October 28, 1994.
13 Incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement (No. 33-20827) filed an December 19, 1994.
14 Incorporated herein by reference to Post-Effective Amendment No. 27 to the Registrant's Registration Statement (No. 33-20827) filed on March 31, 1995.
15 Incorporated herein by reference to Post-Effective Amendment No. 28 to the Registrant's Registration Statement (No. 33-20827) filed on October 6, 1995.
16 Incorporated herein by reference to Post-Effective Amendment No. 29 to the Registrant's Registration Statement (No. 33-20827) filed on October 25, 1995.
17 Incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement (No. 33-20827) filed on May 16, 1996.
18 Incorporated herein by reference to Post-Effective Amendment No. 37 to the Registrant's Registration Statement (No. 33-20827) filed July 30, 1996.
19 Incorporated herein by reference to Post-Effective Amendment No. 39 to the Registrant's Registration Statement (No. 33-20827) filed on October 11, 1996.
20 Incorporated herein by reference to Post-Effective Amendment No. 41 to the Registrant's Registration Statement (No. 33-20827) filed on November 27, 1996.
21 Incorporated herein by reference to Post-Effective Amendment No. 45 to the Registrant's Registration Statement (No. 33-20827) filed on May 9, 1997.
22 Incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrant's Registration Statement (33-20827) filed on September 25, 1997.
23 Incorporated herein by reference to Post-Effective Amendment No. 49 to the Registrant's Registration Statement (33-20827) filed on December 1, 1997.
24 Incorporated herein by reference to Post-Effective Amendment No. 51 to the Registrant's Registration Statement (33-20827) filed on December 8, 1997.
25 Incorporated herein by reference to Post-Effective Amendment No. 53 to the Registrant's Registration Statement (33-20827) filed on April 10, 1998.
26 Incorporated herein by reference to Post-Effective Amendment No. 56 to the Registrant's Registration Statement (33-20827) filed on June 25, 1998.
27 Incorporated herein by reference to Post-Effective Amendment No. 58 to the Registrant's Registration Statement (33-20827) filed on August 25, 1998.
28 Incorporated herein by reference to Post-Effective Amendment No. 59 to the Registrant's Registration Statement (33-20827) filed on September 15, 1998.
29 Incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrant's Registration Statement (33-20827) filed on October 29, 1998
* Refiled herewith in order to comply with Electronic Filing Requirements.
** A copy of such exhibit is filed electronically herewith.
*** To be filed by amendment.
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 October 9, 1998.
TITLE OF CLASS OF COMMON STOCK NUMBER OF RECORD HOLDERS
------------------------------ ------------------------
a) Cash Preservation Money Market 45
b) Cash Preservation Municipal Money Market 51
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 85999
g) RBB Government Securities 469
h) Bedford Municipal Money Market 5312
i) Bedford Government Obligations Money Market 8808
j) BEA International Equity - Institutional Class 467
k) BEA International Equity - Investor Class 1
l) BEA International Equity - Advisor Class 20
m) BEA High Yield - Institutional Class 93
n) BEA High Yield - Investor Class 0
o) BEA High Yield - Advisor Class 12
p) BEA Emerging Markets Equity - Institutional Class 28
q) BEA Emerging Markets Equity - Investor Class 0
r) BEA Emerging Markets Equity - Advisor Class 9
s) BEA U.S. Core Equity - Institutional Class 72
t) BEA U.S. Core Equity - Advisor Class 0
u) BEA U.S. Core Fixed Income 88
v) BEA Strategic Global Fixed Income 17
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 43
bb) BEA Long-Short Market Neutral - Institutional Class 7
cc) BEA Long-Short Market Neutral - Advisor Class 1
dd) BEA Long-Short Equity - Institutional Class 1
ee) BEA Long-Short Equity - Advisor Class 1
ff) BEA Select Economic Value Equity - Institutional Class 12
gg) BEA Select Economic Value Equity - Advisor Class 8
hh) Janney Montgomery Scott
Money Market 114390
ii) Janney Montgomery Scott
Municipal Money Market 4358
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jj) Janney Montgomery Scott
Government Obligations Money Market 33806
kk) Janney Montgomery Scott
New York Municipal Money Market 1411
ll) ni Micro Cap 3290
mm) ni Growth 3062
nn) ni Growth & Value 6284
oo) ni Larger Cap Value 661
pp) Boston Partners Large Cap Value Fund - Institutional
Class 47
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 58
tt) Boston Partners Mid Cap Value Fund - Institutional Class 72
uu) Boston Partners Premium Bond - Institutional Class 7
vv) Boston Partners Premium Bond - Investor Class 5
ww) Boston Partners Micro Cap Value - Institutional Class 19
xx) Boston Partners Micro Cap Value - Investor Class 6
yy) Schneider Small Cap Value Fund 7
zz) RBB Select Money Market 0
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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 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, 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 Numeric's FORM ADV (File No. 801-35649) filed on March 26, 1998, Schedules B and D 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.
PNC BANK, NATIONAL ASSOCIATION
DIRECTORS
POSITION WITH NAME OTHER BUSINESS CONNECTIONS TYPE OF BUSINESS
PNC BANK ---- -------------------------- ----------------
--------
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, Jr. Chairman and Chief Executive Officer Public Utility Holding Company
Consolidated Natural Gas Company
CNG Tower, 625 Liberty Avenue
Pittsburgh, PA 15222-3199
Director David F. Girard-diCarlo Managing Partner Law Firm
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103-6998
Director Walter Emmor Gregg, Jr. One PNC Plaza, P1-POPP-30-1 Diversified Financial Services
249 Fifth Street
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 Land
Union Camp Corporation Resources
1600 Valley Road
Wayne, NJ 07470
Director Thomas Henry O'Brien Chairman and Chief Executive Officer Diversified Financial Services
PNC Bank Corp.
One PNC Plaza, 249 Fifth Avenue
Pittsburgh, PA 15222-2707
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POSITION WITH NAME OTHER BUSINESS CONNECTIONS TYPE OF BUSINESS
PNC BANK ---- -------------------------- ----------------
--------
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 Company
Cinergy Corp.
221 East Fourth Street, Suite 3004
Cincinnati, OH 45202
Director James Edward Rohr President & Chief Operating Officer Diversified Financial Services
PNC Bank N.A.
One PNC Plaza- 30th Floor
Pittsburgh PA 15265
Director Roderic H. Ross Chairman and Chief Executive Officer Insurance Company
Keystone State Life Insurance Co.
Suite 325
501 Office Center Drive
Fort Washington, PA 19034-3299
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 Diversified
USX Corporation Business
61st Floor
600 Grant Street
Pittsburgh, PA 15219-4776
Director Milton A. Washington President and Chief Executive Officer Housing Rehabilitation and
AHRCO Construction
5604 Baum Boulevard
Pittsburgh, PA 15206
Advisory Helge H. Wehmeier President and Chief Executive Officer
Director Bayer Corporation
100 Bayer Road, Building 4
Pittsburgh, PA 15205-9741
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PNC BANK, NATIONAL ASSOCIATION
OFFICERS
David A. Aloise Senior Vice President James C. Altman Senior Vice President Edward V. Arbaugh, III Senior Vice President Douglas R. Arnold Senior Vice President, Regional Consumer Bank |
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Robert Jones Arnold Senior Vice President
James N. Atteberry Senior Vice President
Lila M. Bachelier Senior Vice President
James C. Baker Senior Vice President
Robert C. Barry, Jr. Senior Vice President, Regional Consumer Bank,
Chief Financial Officer, Consumer Bank
James R. Bartholomew Senior Vice President
Peter R. Begg Senior Vice President, Corporate
Human Resources Operations Center
Constance A. Bentzen Senior Vice President
Donald G. Berdine Senior Vice President
Ben Berzin, Jr. Senior Vice President
Paul A. Best Senior Vice President
Michael J. Beyer Senior Vice President
R. Bruce Bickel 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
Larry R. Brown Senior Vice President, Credit Policy
Michael Brundage Senior Vice President
Donna L. Burge Senior Vice President
Brian R. Burns Senior Vice President, Securities Processing
Douglas H. Burr Senior Vice President
David D. Burrow Senior Vice President
James P. Burzotta Senior Vice President
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PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Anthony J. Cacciatore Senior Vice President, I M & T Institutional
Services
William J. Calpin Senior Vice President
Craig T. Campbell Senior Vice President
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
Nickolas P. Certo Senior Vice President, Regional Consumer Bank
Rhonda S. Chatzkel Senior Vice President
Sandra Chickeletti Assistant Secretary
Thomas P. Ciak Assistant Secretary
Joseph A. Clark Senior Vice President
Peter K. Classen President, Northeast PA Market
Andra D. Cochran Senior Vice President
Sharon G. Coghlan Coordinating Market Chief Counsel- Philadelphia
William Harvey Coggin Senior Vice President
John F. Colligan Senior Vice President
James P. Conley Senior Vice President
C. David Cook Senior Vice President
T. Sean Costello Senior Vice President, Secured lending
Keith P. Crytzer Senior Vice President
Terry D'Amore Senior Vice President
John J. Daggett Senior Vice President
Peter J. Danchak Senior Vice President
Douglas D. Danforth, Jr. Executive Vice President, PNC Real Estate
Helen A. DePrisco Executive Vice President
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PNC BANK, NATIONAL ASSOCIATION
OFFICERS
A. J. Desposito Senior Vice President, Business Banking
Richard Devore Senior Vice President
James N. Devries Senior Vice President
Anuj Dhanda Senior Vice President
Victor M. DiBattista Chief Regional Counsel
Frank H. Dilenschneider Senior Vice President
Thomas C. Dilworth Senior Vice President
Alfred J. DiMatties Senior Vice President
Kenneth A. Dorsett Senior Vice President, Private Bank
Henry Doss Senior Vice President, Regional Consumer Bank
Roger C. DuBois Senior Vice President, National Financial
Services Center
Daniel P. Dunn 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 Executive Vice President
John Fox Executive Vice President
Frederick C. Frank, III Executive Vice President
William J. Friel Executive Vice President
John F. Fulgoncy Secretary
Brian K. Garlock Senior Vice President, Private Bank
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PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Leigh Gerstenberger Senior Vice President
Donald W. Giffin, Jr. Senior Vice President
James G. Graham Executive Vice President, Regional Consumer Bank
Gail Carroll Graham Senior Vice President, Private Bank
Craig Davidson Grant Senior Vice President
Gary R. Gray Senior Vice President, Regional Consumer Bank
Barbara J. Griec Senior Vice President
Frederick J. Gronbacher Executive Vice President, National Consumer Bank
Thomas M. Groneman Senior Vice President
Thomas Grundman Senior Vice President
Joan L. Gulley Executive Vice President, Deputy Manager,
Regional Consumer Bank
Joseph C. Guyaux Executive Vice President, Regional Community Bank
Neil F. Hall Executive Vice President
John C. Haller President, Ohio Market
Michael J. Hannon Executive Vice President, Commercial Real Estate
Michael N. Harreld President, Kentucky Market
Catherine E. Haffner Senior Vice President, Regional Consumer Bank
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, Regional Consumer Bank
Sylvan M. Holzer President, Pittsburgh Market
Wayne P. Hunley Senior Vice President
John M. Infield Senior Vice President
Patricia J. Jablonski Senior Vice President, Corporate Banking
Philip C. Jackson Senior Vice President
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PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Robert Greg Jenkins Senior Vice President
William J. Johns Senior Vice President, Corporate Banking
Eric C. Johnson Senior Vice President
William Johnson Audit Director
Robert D. Kane, Jr. Senior Vice President
John J. Kelly Executive Vice President
Michael D.Kelsey Chief Compliance Counsel
Geoffrey R. Kimmel Senior Vice President
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
Richard S. Larimer Senior Vice President
William G. Lashbrook Senior Vice President, PNC Real Estate
Martin S. Lazor Senior Vice President, Consumer Bank
Kenneth P. Leckey Cashier, Senior Vice President, Regional
Consumer Bank
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
Linda R. Manfredonia Senior Vice President
Nicholas M. Marsini, Jr. Senior Vice President
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PNC BANK, NATIONAL ASSOCIATION
OFFICERS
John A. Martin Senior Vice President David O. Matthews Senior Vice President Dennis McChesney Executive Vice President Walter B. McClellan Senior Vice President Patricia McCrossan 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 Executive Vice President James C. Mendelson Senior Vice President David W. Mengel Senior Vice President, Corporate Banking 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 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 Marlene D. Mosco President, Northwest PA Market |
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Peter F. Moylan Senior Vice President Ronald J. Murphy Executive Vice President Louis J. Myers Senior Vice President, Regional Consumer Bank 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 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 W. David Pendl Senior Vice President Stephen D. Penn Senior Vice President John J. Peters Senior Vice President David A. Pioch Senior Vice President Donald G. Poppleton Senior Vice President, AAA Administrator Helen P. Pudlin Senior Vice President, and General Counsel Wayne Pulliam Senior Vice President Arthur F. Radman, III Senior Vice President Edward E. Randall Senior Vice President Gerald A. Recktenwald Chief Financial Officer, Secured lending Robert Q. Reilly Senior Vice President Jesse S. Reinhardt Senior Vice President Ronald J. Retzler Senior Vice President |
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Richard C. Rhoades Senior Vice President
Charles M. Rhodes, Jr. Senior Vice President
C. Joseph Richardson Senior Vice President
Rodger L. Rickenbrode Senior Vice President
Bryan W. Ridley Senior Vice President
Victor M. Rivera Senior Vice President
Bruce E. Robbins Executive Vice President, Secured Lending
James E. Rohr President and Chief Operating Officer
Peter M. Ross Senior Vice President
Suzanne C. Ross Senior Vice President
Gerhard Royer Senior Vice President
Robert T. Saltarelli Senior Vice President
Robert V. Sammartino 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
Richard L. Smoot President and CEO of PNC Bank, Philadelphia/
S. Jersey Region
Timothy N. Smyth Senior Vice President, Trust Division
Richard R. Soeder Senior Vice President
Darcel H. Steber Senior Vice President
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PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Melvin A. Steele Senior Vice President
Richard Stegemeier Senior Vice President
James S. Stone Senior Vice President, Treasurer, Management
Operations
William F. Strome Senior Vice President, Consumer Bank
Connie Bond Stuart Senior Vice President
Lon E. Susak Senior Vice President
Stephen L. Swanson Executive Vice President
Frank A. Taucher Senior Vice President
Peter W. Thompson Senior Vice President
Alex T. Topping Senior Vice President
Alan B. Trivilino Senior Vice President, Regional Consumer Bank
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. Van der Horst Executive Vice President
Ronald H. Vicari Senior Vice President
James M. Voytko Senior Vice President, Investment Strategy and
Research Group
Bruce E. Walton Executive Vice President
Annette M. Ward-Kredel Senior Vice President
Robert S. Warth Senior Vice President
Leonard A. Watkins Senior Vice President
Frances A. Wilkinson Assistant Secretary
Thomas K. Whitford Executive Vice President, Private Bank
George Whitmer Senior Vice President
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PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Nancy B. Wolcott Executive Vice President Arlene M. Yocum Senior Vice President Carole Yon Senior Vice President 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.
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(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.
(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.)
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
(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) Numeric Investors, L.P., 1 Memorial Drive, Cambridge, Massachusetts 02142 (records relating to its function as investment adviser).
(7) Boston Partners Asset Management, L.P., One Financial Center, 43rd Floor, Boston, Massachusetts 02111 (records relating to its function as investment adviser).
(8) 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.
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. 61 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 30th day of October, 1998.
THE RBB FUND, INC.
By: /S/ EDWARD J. ROACH
Edward J. Roach
President and Treasurer
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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 October 30, 1998
------------------- Officer) and Treasurer (Principal
Edward J. Roach Financial and Accounting Officer)
*/S/DONALD VAN RODEN Director October 30, 1998
------------------------
Donald van Roden
*/S/FRANCIS J. MCKAY Director October 30, 1998
-------------------------
Francis J. McKay
*/S/MARVIN E. STERNBERG Director October 30, 1998
-------------------------
Marvin E. Sternberg
*/S/JULIAN A. BRODSKY Director October 30, 1998
-------------------------
Julian A. Brodsky
*/S/ARNOLD M. REICHMAN Director October 30, 1998
-------------------------
Arnold M. Reichman
*/S/ROBERT SABLOWSKY Director October 30, 1998
-------------------------
Robert Sablowsky
*By:/S/ EDWARD J. ROACH October 30, 1998
---------------------
Edward J. Roach
Attorney-in-Fact
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THE RBB FUND, INC.
(the "Company")
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
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THE RBB FUND, INC.
(the "Company")
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 S. STERNBERG
-------------------
Marvin E. Sternberg
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THE RBB FUND, INC.
(the "Company")
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
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THE RBB FUND, INC.
(the "Company")
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 |
THE RBB FUND, INC.
(the "Company")
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 there to 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
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THE RBB FUND, INC.
(the "Company")
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
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THE RBB FUND, INC.
EXHIBIT INDEX
EXHIBITS
(1) (a) Articles of Incorporation of Registrant.
(b) Articles Supplementary of Registrant.
(c) Articles of Amendment to Articles of Incorporation of
Registrant.
(d) Articles Supplementary of Registrant.
(e) Articles Supplementary of Registrant.
(f) Articles Supplementary of Registrant.
(g) Articles Supplementary of Registrant.
(h) Articles Supplementary of Registrant.
(i) Articles Supplementary of Registrant.
(j) Articles Supplementary of Registrant.
(k) Articles Supplementary of Registrant.
(l) Articles Supplementary of Registrant.
(m) Articles Supplementary of Registrant.
(n) Articles Supplementary of Registrant.
(5) (a) Investment Advisory Agreement (Money Market) between
Registrant and Provident Institutional Management
Corporation, dated as of August 16, 1988.
(b) Sub-Advisory Agreement (Money Market)
between Provident Institutional Management
Corporation and Provident National Bank, dated as of
August 16, 1988.
(c) Investment Advisory Agreement (Tax-Free
Money Market) between Registrant and Provident
Institutional Management Corporation, dated as of
August 16, 1988.
(d) Sub-Advisory Agreement (Tax-Free Money
Market) between Provident Institutional Management
Corporation and Provident National Bank, dated as of
August 16, 1988.
(e) Investment Advisory Agreement
(Government Obligations Money Market) between
Registrant and Provident Institutional Management
Corporation, dated as of August 16, 1988.
(f) Sub-Advisory Agreement (Government Obligations Money Market)
between Provident Institutional Management Corporation and
Provident National Bank, dated as of August 16, 1988.
(g) Investment Advisory Agreement (Government Securities)
between Registrant and Provident Institutional Management
Corporation dated as of April 8, 1991.
(h) Investment Advisory Agreement (New York Municipal Money
Market) between Registrant and Provident Institutional
Management Corporation dated November 5, 1991.
(i) Investment Advisory Agreement (Tax-Free Money Market)
between Registrant and Provident Institutional Management
Corporation dated April 21, 1992.
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(8) (a) Custodian Agreement between Registrant and Provident
National Bank dated as of August 16, 1988.
(b) Sub-Custodian Agreement among The Chase Manhattan
Bank, N.A., the Registrant and Provident National
Bank, dated as of July 13, 1992, relating to custody
of Registrant's foreign securities.
(c) Amendment No. 1 to Custodian Agreement dated
August 16, 1988.
(d) Custodian Contract between Registrant and State Street Bank
and Trust Company.
(9) (a) Transfer Agency Agreement (Sansom Street) between
Registrant and Provident Financial Processing Corporation,
dated as of August 16, 1988.
(b) Transfer Agency Agreement (Cash Preservation) between
Registrant and Provident Financial Processing Corporation,
dated as of August 16, 1988.
(c) Shareholder Servicing Agreement (Sansom Street Money
Market).
(d) Shareholder Servicing Agreement (Sansom Street Tax-Free
Money Market).
(e) Shareholder Servicing Agreement (Sansom Street Government
Obligations Money Market).
(f) Shareholder Services Plan (Sansom Street Money Market).
(g) Shareholder Services Plan (Sansom Street Tax-Free Money
Market).
(h) Shareholder Services Plan (Sansom Street Government
Obligations Money Market).
(i) Transfer Agency Agreement (Bedford) between Registrant and
Provident Financial Processing Corporation, dated as of
August 16, 1988.
(j) Administration and Accounting Services Agreement
between Registrant and Provident Financial
Processing Corporation, relating to Government
Securities Portfolio, dated as of April 10, 1991.
(k) Administration and Accounting Services Agreement
between Registrant and Provident Financial
Processing Corporation, relating to New York
Municipal Money Market Portfolio dated as of
November 5, 1991.
(l) Transfer Agency Agreement and Supplements (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.
(m) Administration and Accounting Services Agreement
between Registrant and Provident Financial
Processing Corporation, relating to Tax-Free Money
Market Portfolio, dated as of April 21, 1992.
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(11) (a) Consent of Drinker Biddle & Reath LLP
(15) (a) Plan of Distribution (Sansom Street Money Market).
(b) Plan of Distribution (Sansom Street Tax-Free Money Market).
(c) Plan of Distribution (Sansom Street Government Obligations
Money Market).
(d) Plan of Distribution (Cash Preservation Money).
(e) Plan of Distribution (Cash Preservation Tax-Free Money
Market).
(f) Plan of Distribution (Bedford Money Market).
(g) Plan of Distribution (Bedford Tax-Free Money Market).
(h) Plan of Distribution (Bedford Government Obligations Money
Market).
(j) Amendment No. 1 to Plans of Distribution (Classes A
through Q).
(k) Plan of Distribution (Alpha (now known as Janney) Money
Market).
(l) Plan of Distribution (Alpha (now known as Janney)
Tax-Free Money Market (now known as the Municipal
Money Market)).
(m) Plan of Distribution (Alpha (now known as Janney) Government
Obligations Money Market).
(n) Plan of Distribution (Alpha (now known as Janney) New York
Municipal Money Market).
(o) Plan of Distribution (Beta Tax-Free Money Market).
(p) Plan of Distribution (Beta Government Obligations Money
Market).
(q) Plan of Distribution (Beta New York Money Market).
(r) Plan of Distribution (Gamma Tax-Free Money Market).
(s) Plan of Distribution (Gamma Government Obligations Money
Market).
(t) Plan of Distribution (Gamma New York Municipal Money
Market).
(u) Plan of Distribution (Delta Money Market).
(v) Plan of Distribution (Delta Tax-Free Money Market).
(w) Plan of Distribution (Delta Government Obligations Money
Market).
(x) Plan of Distribution (Delta New York Municipal Money
Market).
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(y) Plan of Distribution (Epsilon Money Market).
(z) Plan of Distribution (Epsilon Tax-Free Money Market).
(aa) Plan of Distribution (Epsilon Government Obligations Money
Market).
(bb) Plan of Distribution (Epsilon New York Municipal Money
Market).
(cc) Plan of Distribution (Zeta Money Market).
(dd) Plan of Distribution (Zeta Tax-Free Money Market).
(ee) Plan of Distribution (Zeta Government Obligations Money
Market).
(ff) Plan of Distribution (Zeta New York Municipal Money Market).
(gg) Plan of Distribution (Eta Money Market).
(hh) Plan of Distribution (Eta Tax-Free Money Market).
(ii) Plan of Distribution (Eta Government Obligations Money
Market).
(jj) Plan at Distribution (Eta New York Municipal Money Market).
(kk) Plan of Distribution (Theta Money Market).
(ll) Plan of Distribution (Theta Tax-Free Money Market).
(mm) Plan of Distribution (Theta Government Obligations Money
Market).
(nn) Plan of Distribution (Theta New York Municipal Money
Market).
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Exhibit 1(a)
ARTICLES OF INCORPORATION
OF
THE FUND, INC.
ARTICLE I
THE UNDERSIGNED, Frank T. Stephens, whose post office address is 123 South Broad Street, Philadelphia, Pennsylvania 19109, being at least eighteen years of age, does hereby act as an incorporator, under and by virtue of the General Laws of the State of Maryland authorizing the formation of corporations and with the intention of forming a corporation.
ARTICLE II
The name of the Corporation is:
THE FUND, INC.
ARTICLE III
The purpose for which the Corporation is formed is to act as an open end management investment company under the Investment Company Act of 1940, as amended, (the "1940 Act") and to exercise and generally to enjoy all of the powers, rights and privileges granted to, or conferred upon, corporations by the general laws of the State of Maryland now or hereafter in force.
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and other investments including assets in cash.
(2) To issue and sell shares of its capital stock in such amounts and on such terms and conditions and for such purposes and for such amount or kind of consideration as may now or hereafter be permitted by law.
(3) To redeem, purchase or otherwise acquire, hold, dispose of, resell, transfer, re-issue or cancel (all without the vote or consent of the shareholders of the Corporation) shares of its capital stock, in any manner and to the extent now or hereafter permitted by law and by these Articles of Incorporation of the Corporation.
(4) To enter into a written contract or contracts with any person or persons providing for a delegation of the management of all or part of this Corporation's securities portfolio(s) and also for the delegation of the performance of various administrative or corporate functions, subject to the direction of the Board of Directors. Any such contract or contracts may be made with any person even though such person may be an officer, other employee, Director or shareholder of this Corporation or a corporation, partnership, trust or association in which any such officer, other employee, Director or shareholder may be interested.
(5) To enter into a written contract or contracts appointing one or more underwriters, distributors or agents for the sale of the shares of the Corporation on such terms and conditions as the Board of Directors of this Corporation may deem reasonable and proper, and to allow such person or persons a commission on the sale of such shares. Any such contract or contracts may be made with any person even though such person may be an officer, other employee, Director or shareholder of this Corporation or a corporation, partnership, trust or association in which any such officer, other employee, Director or shareholder may be interested.
(6) To enter into a written contract or contracts employing such custodian or custodians for the safekeeping of the property of the Corporation and of its shares, such dividend disbursing agent or agents, and such transfer agent or agents and registrar or registrars for its shares, and such agent or agents for accounting and other administrative services on such terms and conditions as the Board of Directors of this Corporation may deem reasonable and proper for the conduct of the affairs of the Corporation, and to pay the fees and disbursements of such custodians, dividend disbursing agents, transfer agents, registrars and accounting and administrative services agents out of the income and/or any other property of the Corporation. Notwithstanding any other provisions of the Articles of Incorporation or the By-Laws of the Corporation, the Board of Directors may cause any or all of the property of the Corporation to be transferred to, or to be acquired and held in the name of, a custodian so appointed or any nominee or nominees of this Corporation or nominee or nominees of such custodian satisfactory to the Board of Directors.
(7) To employ the same person, partnership (general or limited),
association, trust or corporation in any multiple capacity under Sections (4),
(5) and 16) of this Article, who may receive compensation from the Corporation
in as many capacities in which such person, partnership (general or limited),
association, trust or corporation shall serve the Corporation.
(8) To do any and all such further acts or things and to exercise any and all such further powers or rights as may be necessary, incidental, relative, conducive, appropriate or desirable for the accomplishment, carrying out or attainment of the purposes stated in Article III hereof.
The Corporation shall be authorized to exercise and enjoy all of the powers, rights and privileges granted to, or conferred upon, corporations by the General Laws of the State of Maryland now or hereafter in force, and the enumeration of the foregoing shall not be deemed to exclude any powers, rights or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the Corporation
in the State of Maryland is 32 South Street, Baltimore, Maryland 21201. The name
of the resident agent of the Corporation in this State is The Corporation Trust
Incorporated, a citizen of this State, who resides there and the post office
address of the resident agent is 32 South Street, Baltimore, Maryland 21202.
ARTICLE VI
(1) The total number of shares of capital stock which the Corporation shall have the authority to issue is Five Billion (5,000,000,000) shares, of the par value of 1 million ($.001) per share and of the aggregate par value of Five Million Dollars ($5,000,000.00), all of which shares are designated Common Stock. The number of shares of stock of each class is such number, if any, of shares of unissued stock as is classified or reclassified into such class by the Corporation's Board of Directors pursuant to the authority contained in Section 2-105 of the Maryland General Corporation Law (or any successor provision). Unless and until the Corporation's Board of Directors classifies unissued stock into one or more classes which are in addition to a single outstanding class, or after the Board has reclassified issued stock of one or more classes into a single class, all shares of stock of the Corporation shall be a single class. Unless otherwise prohibited by law, so long as the Corporation is registered as an open-end investment company under the 1940 Act, the Board of Directors shall have the power and authority, without the approval of the holders of any outstanding shares, to increase or decrease the number of shares of capital stock, or the number of shares of capital stock of any class or series, that the Corporation has authority to issue.
(2) Any fractional share shall carry proportionately all the rights of a whole share, excepting any right to receive a certificate evidencing such fractional share, but including, without limitation, the right to vote and the right to receive dividends.
(3) All persons who shall acquire stock in the Corporation shall acquire the same subject to the provisions of the Articles of Incorporation and the By-Laws of the Corporation. All shares issued pursuant to these Articles of Incorporation for which the price or consideration fixed thereon shall have been paid shall be deemed to be fully paid and non-assessable.
(4) The Board of Directors shall have authority to classify and reclassify any authorized but unissued shares of capital stock from time to time by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of the capital stock; provided that the Board of Directors shall not classify or reclassify any of such shares into any class or series of stock which is prior to any class or series of capital stock then outstanding with respect to rights upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the general assets of, the Corporation, except that there may be variations so fixed and determined among different series and classes as to investment objectives, purchase price, right of redemption, special rights as to dividends, and in liquidation, with respect to assets belonging to a particular series or class, voting powers and conversion rights. Subject to the provisions of Section 6 of this Article VI and applicable law, the power of the Board of Directors to classify or reclassify any of the shares of capital stock shall include, without limitation, authority to classify or reclassify any such stock into a class or classes of capital stock and to divide and classify shares of any class into one or more series of such class, by determining, fixing or altering one or more of the following:
(A) The distinctive designation of such class or series and the number of shares to constitute such class or series; provided that, unless otherwise prohibited by the terms of such class or series, the number of shares of any class or series may be decreased by the Board of Directors' in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any class or series which have been redeemed, purchased or otherwise acquired by the Corporation shall remain part of the authorized capital stock and be subject to classification and reclassification as provided herein.
(B) Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such class or series.
(C) Whether or not shares of such class or series shall have voting rights in addition to any general voting rights provided by law and the Articles of Incorporation of the Corporation and, if so, the terms of such additional voting rights.
(D) The rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation.
(E) Any other rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with law and the Articles of Incorporation of the Corporation.
(5) The Board of Directors shall have authority to issue from time to time shares of capital stock, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable, subject to such limitations as may be set forth in the Articles of Incorporation or the By-Laws of the Corporation or in the Maryland General Corporation Law.
(6) Shares of Common Stock of the Corporation shall have the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption:
(A) Assets Belonging to a Class. All consideration received by the Corporation for the issue or sale of stock of any class of Common Stock, together with all assets in which such consideration is invested and reinvested, income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to the class of shares of Common Stock with respect to which such assets, payments or funds were received by the Corporation for all purposes, subject only to the rights of creditors, and shall be so handled upon the books of account of the Corporation. Such consideration, assets, income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any assets derived from any reinvestment of such proceeds in whatever form, are herein referred to as "assets belonging to" such class. Any assets, income, earnings, profits, and proceeds thereof, funds or payments which are not readily attributable to any particular class shall be allocable among any one or more of the classes in such manner and on such basis as the Board of Directors, in its sole discretion, shall deem fair and equitable.
(B) Liabilities Belonging to a Class. The assets belonging to any class of Common Stock shall be charged with the liabilities in respect of such class, and shall also be charged with such class' share of the general liabilities of the Corporation determined as hereinafter provided. The determination of the Board of Directors shall be conclusive as to the amount of such liabilities, including the amount of accrued expenses and reserves; as to any allocation of the same to a given class; and as to whether the same are allocable to one or more classes. The liabilities so allocated to a class are herein referred to as "liabilities belonging to" such class. Any liabilities which are not readily attributable to any particular class shall be allocable among any one or more of the classes in such manner and on such basis as the Board of Directors, in its sole discretion, shall deem fair and equitable.
(C) Dividends and Distributions. Shares of each class of Common Stock shall be entitled to such dividends and distributions, in stock or in cash or both, as may be declared from time to time by the Board of Directors, acting in its sole discretion, with respect to such class, provided, however, that dividends and distributions on shares of a class of Common Stock shall be paid only out of the lawfully available "assets belonging to such class" as such phrase is defined in Section 6(A) of this Article VI.
(D) Liquidating Dividends and Distributions. In the event of the liquidation or dissolution of the Corporation, shareholders of each class of Common Stock shall be entitled to receive, as a class, out of the assets of the Corporation available for distribution to shareholders, but other than general assets not belonging to any particular class of stock, the assets belonging to such class; and the assets so distributable to the shareholders of any class of Common Stock shall be distributed among such shareholders in proportion to the number of shares of such class held by them and recorded on the books of the Corporation. In the event that there are any general assets not belonging to any particular class of stock and available for distribution, such distribution shall be made to the holders of stock of all classes of Common Stock in proportion to the asset value of the respective classes of Common Stock determined as hereinafter provided.
(E) Voting. Each shareholder of each class of Common Stock shall
be entitled to one vote for each share of Common Stock, irrespective of the
class, then standing in his name on the books of the Corporation or as
otherwise provided by the By-Laws, and on any matter submitted to a vote of
shareholders, all shares of Common Stock then issued and outstanding and
entitled to vote shall be voted in the aggregate and not by class except that:
(i) when expressly required by law, shares of Common Stock shall be voted by
individual class and (ii) only shares of Common Stock of the respective class
or classes affected by a matter shall be entitled to vote on such matter. At
all meetings of the shareholders, the holders of one-third of the shares of
stock of the Corporation entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for the transaction of any business, except
as otherwise provided by statute or by the Articles of Incorporation. In the
absence of a quorum no business may be transacted, except that the holders of a
majority of the shares of stock present in person or by proxy and entitled to
vote may adjourn the meeting from time to time, without notice other than
announcement at the meeting except as otherwise required by the By-Laws, until
the holders of the requisite amount of shares of stock shall be so present. At
any such adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally
called. When a quorum is present, each matter voted upon shall be decided by
the vote of the holders of a majority of the votes entitled to be cast on such
matter, except as otherwise provided by statute or by the Articles of
Incorporation. The absence from any meeting, in person or by proxy, of holders
of the number of shares of stock of the Corporation in excess of a majority
thereof which may be required by the laws of the State of Maryland, the 1940
Act, or other applicable statute, the Articles of Incorporation, or the
By-Laws, for action upon any given matter shall not prevent action at such
meeting upon any other matter or matters which may properly come before the
meeting, if there shall be present at the meeting, in person or by proxy,
holders of the number of shares of stock of the Corporation required for action
in respect of such other matter or matters.
(F) Redemption. To the extent the Corporation has funds or other property legally available there for each holder of shares of Common Stock of the Corporation shall be entitled to require the Corporation to redeem all or any part of the shares of Common Stock of the Corporation standing in the name of such holder on the books of the Corporation, and all shares of Common Stock issued by the Corporation shall be subject to redemption by the Corporation, at the redemption price of such shares as in effect from time to time as may be determined by the Board of Directors of the Corporation in accordance with the provisions hereof, subject to the right of the Board of Directors of the Corporation to suspend the right of redemption of shares of Common Stock of the Corporation or postpone the date of payment of such redemption price in accordance with provisions of applicable law. Without limiting the generality of the foregoing, the Corporation shall, to the extent permitted by applicable law, have the right at any time to redeem the shares owned by any holder of Common Stock of the Corporation (i) if such redemption is, in the opinion of the Board of Directors of the Corporation, desirable in order to prevent the Corporation from being deemed a "personal holding company" within the meaning of the Internal Revenue Code of 1986, as amended,(ii) if the value of such shares in the account maintained by the Corporation or its transfer agent for any class of Common Stock is less than $500.00 (Five Hundred Dollars) provided, however, that each shareholder shall be notified that the value of his account is less than $500.00 and allowed thirty (30) days to make additional purchases of shares before such redemption is processed by the Corporation, or (iii) if the net income with respect to an particular class of Common Stock should be negative or it should otherwise be appropriate to carry out the Corporation's responsibilities under the 1940 Act, in each case subject to such further terms and conditions as the Board of Directors of the Corporation my from time to time adopt. The redemption price of shares of Common Stock of the Corporation shall, except as otherwise provided in this Section 6(F), be the net asset value thereof as determined by the Board of Directors of the Corporation from time to time in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors of the Corporation. Payment of the redemption price shall be made in cash by the Corporation at such time and in such manner as may be determined from time to time by the Board of Directors of the Corporation unless, in the opinion of the Board of Directors, which shall be conclusive, conditions exist which make payment wholly in cash unwise or undesirable; in such event the Corporation may make payment wholly or partly by securities or other property included in the assets belonging or allocable to the class of the shares redemption of which is being sought, the value of which shall be determined as provided herein.
(G) Conversion or Exchange. Each holder of any class of Common Stock of the Corporation, who surrenders his share certificate in good delivery form to the Corporation or, if the shares in question are not represented by certificates, who delivers to the Corporation a written request in good order signed by the shareholder, shall, subject to such procedures as may be established by the Board of Directors, be entitled to convert or exchange the shares in question on the basis hereinafter set forth, into shares of stock of any other class of the Corporation. The Corporation shall determine the net asset value, as provided herein, of the shares to be converted and may deduct therefrom a conversion or exchange cost, in an amount determined within the discretion of the Board of Directors. Within five (5) business days after such surrender and payment of any conversion or exchange cost, the Corporation shall issue to the shareholder such number of shares of stock of the class desired as, taken at the net asset value thereof determined as provided herein in the same manner and at the same time as that of the shares surrendered, shall equal the net asset value of the shares surrendered, less any conversion or exchange cost as aforesaid. Any amount representing a fraction of a share may be paid in cash at the option of the Corporation. Any conversion or exchange cost may be paid and/or assigned by the Corporation to the underwriter and/or to any other agency, as it may elect.
(H) Restrictions on Transferability. If, in the opinion of the Board of Directors of the Corporation, concentration in the ownership of shares of Common Stock might cause the Corporation to be deemed a personal holding company within the meaning of the Internal Revenue Code, as now or hereafter in force, the Corporation may at any time and from time to time refuse to give effect on the books of the Corporation to any transfer or transfers of any share or shares of Common Stock in an effort to prevent such personal holding company status.
ARTICLE VII
(1) The number of Directors of the Corporation shall be five (5), which number may be increased or decreased pursuant to the By-Laws of the Corporation but shall never be less than three (3) except for any period during which shares of the Corporation are held by fewer than three shareholders. The name of the Director who shall act until the Directors are elected by the Corporation's shareholder or until his successor is duly elected and qualifies is:
Joe McKee Thomson
(2) No holder of stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any shares of the capital stock of the Corporation or any other security of the Corporation which it may issue or sell (whether out of the number of shares authorized by the Articles of Incorporation, or out of any shares of the capital stock of the Corporation acquired by it after the issue thereof, or otherwise) other than such right, if any, as the Board of Directors, in its discretion, may determine.
ARTICLE VIII
Section 1. Directors, Officers, etc. The Corporation shall indemnify each of its Directors and officers (including persons who serve at the Corporation's request as directors, officers or trustees of another organization in which the Corporation has any interest as a shareholder, creditor or otherwise) (hereinafter referred to as a "Covered Person") against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Covered Person may be or may have been involved as a party or otherwise or with which such Covered Person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Covered Person except with respect to any matter as to which such covered Person shall have been finally adjudicated in any such action, suit or other proceeding (a) not to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Corporation or, in the case of any criminal proceeding, with reasonable cause to believe that the conduct was lawful, or (b) to be liable to the Corporation or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's Office. Expenses, including counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), shall be paid from time to time by the Corporation in advance of the final disposition of any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Covered Person to repay amounts so paid to the Corporation if it is ultimately determined that indemnification of such expenses is not authorized under this Article, provided, however, that such Covered Person shall have affirmed that he in good faith believes that he has met the standard of conduct necessary for indemnification and shall have provided a written undertaking to repay the amount if it is ultimately determined that the standard of conduct has not been met and either a majority of the Directors acting on the matter who are not parties to such action (provided that at least two of such Directors then in office act on the matter), or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts that there is reason to believe that such Covered Person will be found entitled to indemnification under this Article.
Section 2. Disposition Without Adjudication. As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication by a court, or by any other body before which the proceeding was brought, that such Covered Person either (a) did not act in good faith in the reasonable belief that his action was in the best interests of the Corporation or, in the case of any criminal proceeding, with reasonable cause to believe that the conduct was lawful (b) is liable to the Corporation or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, indemnification shall be provided if (i) approved as in the best interest of the Corporation, by at least a majority of the Directors acting on the matter who are not parties to such action (provided that at least two of such Directors then in office act on the matter) upon a determination, based upon a review of readily available facts at a meeting called for the purpose of reviewing such indemnification that such Covered Person acted in good faith in the reasonable belief that his action was in the best interests of the Corporation and is not liable to the Corporation or its Shareholders by reasons of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, or (ii) there has been obtained an opinion in writing of independent legal counsel, based upon a review of readily available facts to the effect that such Covered Person appears to have acted in good faith in the reasonable belief that his action was in the best interests of the Corporation and that such indemnification would not protect such Covered Person against any liability to the Corporation 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. Any approval pursuant to this Section shall not prevent the recovery from any Covered Person of any amount paid to such Covered Person in accordance with this Section as indemnification if such Covered Person is subsequently adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Corporation or to have been liable to the Corporation or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office, or in the case of any criminal proceeding, to have acted without reasonable cause to believe that his conduct was lawful.
Section 3. Indemnification Not Exclusive. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which such Covered Person may be entitled. As used in this Article VIII, the term "Covered Person" shall include such person's heirs, executors and administrators and a "disinterested Director" is a Director who is not an "interested person" of the Corporation as defined in Section 2(a)(19) of the 1940 Act, (or who has been exempted from being an "interested person" by any rule, regulation or order of the Commission) and against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or has been pending. Nothing contained in this Article shall affect any rights to indemnification to which personnel of the Corporation, other than Directors or officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Corporation to purchase and maintain liability insurance on behalf of any such person; provided, however, that the Corporation shall not purchase or maintain any such liability insurance in contravention of applicable law, including without limitation the 1940 Act.
ARTICLE IX
Any determination made in good faith, so far as accounting matters are involved, in accordance with accepted accounting practices by or pursuant to the direction of the Board of Directors, as to the amount of assets, obligations or liabilities of the Corporation, as to the amount of net income of the Corporation from dividends and interest for any period or amounts at any time legally available for the payment of dividends, as to the amount of any reserves or charges set up and the propriety thereof, as to the time of or purpose for creating reserves or as to the use, alteration or cancellation of any reserves or charges (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged or shall be then or thereafter required to be paid or discharged), as to the value of any security owned by the Corporation or as to any other matters relating to the issuance, sale, redemption or other acquisition or disposition of securities or shares of capital stock of the Corporation, and any reasonable determination made in good faith by the Board of Directors as to whether any transaction constitutes a purchase of securities on "margin", a sale of securities "short", or an underwriting of the sale of, or a participation in any underwriting or selling group in connection with the public distribution of any securities, shall be final and conclusive, and shall be binding upon the Corporation and all holders of its capital stock, past, present and future, and shares of the capital stock of the Corporation are issued and sold on the condition and understanding, evidenced by the purchase of shares of capital stock or acceptance of share certificates, that any and all such determinations shall be binding as aforesaid. No provision of the Articles of Incorporation of the Corporation shall be effective to (i) require a waiver of compliance with any provision of the Securities Act of 1933, as amended, or the 1940 Act, or of any valid rule, regulation or order of the Securities and Exchange Commission thereunder or (ii) 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.
ARTICLE X
The duration of this Corporation shall be perpetual.
ARTICLE XI
(1) The Corporation reserves the right from time to time to make any amendments to its Articles of Incorporation which may now or hereafter be authorized by law, including any amendments changing the terms or contract rights, as expressly set forth in its Articles of Incorporation, of any of its outstanding stock by classification, reclassification or otherwise, but no such amendment which changes such terms or contract rights of any of its outstanding stock shall be valid unless such amendment shall have been authorized by not less than a majority of the aggregate number of the votes entitled to be cast thereon by a vote at a meeting or by the unanimous written consent as provided in the Corporation's By-Laws.
(2) Notwithstanding any provision of the General Laws of the State of Maryland requiring any action to be taken or authorized by the affirmative vote of a greater proportion than the majority of the total number of shares of any class of stock of the Corporation, such action shall be effective and valid if taken or authorized by the affirmative vote of the holders of a majority of the total number of shares outstanding of that class of stock entitled to vote thereon, except as otherwise provided in the Articles of Incorporation.
(3) So long as permitted by Maryland law, the books of the Corporation may be kept outside of the State of Maryland at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation.
(4) In furtherance, and not in limitation, of the powers conferred by the laws of the State of Maryland, the Board of Directors is expressly authorized:
(A) To make, alter or repeal the By-Laws of the Corporation, except where such power is reserved by the By-Laws to the shareholders, and except as otherwise required by the 1940 Act.
(B) From time to time to determine whether and to what extent and at what times and places and under what conditions and regulations the books and accounts of the Corporation, or any of them other than the stock ledger, shall be open to the inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by law or authorized by resolution of the Board of Directors or of the shareholders.
(C) Without the assent or vote of the shareholders, to authorize the issuance from time to time of shares of the stock of any class of the Corporation, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable.
(D) Without the assent or vote of the shareholders, to authorize and issue obligations of the Corporation, secured and unsecured, as the Board of Directors may determine, and to authorize, and cause to be executed mortgages and liens upon the property of the Corporation, real and personal.
(E) Notwithstanding anything in these Articles of Incorporation to the contrary, to establish in its absolute discretion the basis or method for determining the value of the assets belonging to any class, and the net asset value of each share of any class of the Corporation for purposes of sales, redemptions, repurchases of shares or otherwise.
(F) To determine in accordance with generally accepted accounting principles and practices what constitutes net profits, earnings, surplus or net assets in excess of capital, and to determine what accounting periods shall be used by the Corporation for any purpose, whether annual or any other period, including daily; to set apart out of any funds of the Corporation such reserves for such purposes as it shall determine and to abolish the same; to declare and pay any dividends and distributions in cash, securities or other property from surplus or any funds legally available therefor, at such intervals (which may be as frequently as daily) or on such other periodic basis, as it shall determine; to declare such dividends or distributions by means of a formula or other method of determination, at meetings held less frequently than the frequency of the effectiveness of such declarations; to establish payment dates for dividends or any other distributions on any basis, including dates occurring less frequently than the effectiveness of declarations thereof; and to provide for the payment of declared dividends on a date earlier or later than the specified payment date in the case of shareholders of the Corporation redeeming their entire ownership of shares of any class of the Corporation.
(G) In addition to the powers and authorities granted herein and by Statute expressly conferred upon it, the Board of Directors is authorized to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of Maryland law, these Articles of Incorporation and the By-Laws of the Corporation.
IN WITNESS WHEREOF, the undersigned incorporator of THE FUND, INC. hereby executes the foregoing Articles of Incorporation and acknowledges the same to be his act on the 17th day of February, 1988.
/s/FRANK T. STEPHENS -------------------- Frank T. Stephens Incorporator |
WITNESS:
/s/MARION L. STEAGEL -------------------- |
Exhibit 1(b)
THE FUND, INC.
ARTICLES SUPPLEMENTARY TO THE ARTICLES OF INCORPORATION
THE 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 sole director of the Corporation, pursuant to a written consent dated March 21, 1988, adopted resolutions:
classifying one hundred million (100,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, and with an aggregate par value of One Hundred Thousand Dollars ($100,000) as Class A Common Stock;
classifying one hundred million ($100,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, and with an aggregate par value of one Hundred Thousand Dollars ($100,000) as Class B Common Stock;
classifying one hundred million ($100,000,000) unissued shares of the common stock of the Corporation, par value $.001 per share, and with an aggregate par value of One Hundred Thousand Dollars ($100,000) as Class C Common Stock;
classifying one hundred million (100,000,000) unissued shares of the common stock of the Corporation, par value $.001 per share, and with an aggregate par value of One Hundred Thousand Dollars ($100,000) as Class D Common Stock;
classifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, and with an aggregate par value of Five Hundred Thousand Dollars ($500,000) as Class E Common Stock;
classifying five, hundred million (500,000,000) unissued shares of the common stock of the Corporation, par value $.001 per share, and with an aggregate par value of Five Hundred Thousand Dollars ($500,000) as Class F Common Stock;
classifying five hundred million (500,000,000) unissued shares of the common stock of the Corporation, par value $.001 per share, and with an aggregate par value of Five Hundred Thousand Dollars ($500,000) as Class G Common Stock;
classifying five hundred million (500,000,000) unissued shares of the common stock of the Corporation, par value $.001 per share, and with an aggregate par value of Five Hundred Thousand Dollars ($500,000) as Class H Common Stock;
classifying five hundred million (500,000,000) unissued shares of the common stock of the Corporation, par value $.001 per share and with an aggregate par value of Five Hundred Thousand Dollars ($500,000) as Class I Common Stock;
classifying five hundred million (500,000,000) unissued shares of the common stock of the Corporation, par value $.001 per share, and with an aggregate par value of Five Hundred Thousand Dollars ($500,000) as Class J Common Stock;
classifying five hundred million (500,000,000) unissued shares of the common stock of the Corporation, par value $.001 per share and with an aggregate par value of Five Hundred Thousand Dollars ($500,000) as Class K Common Stock; and by settling before the issuance, of such shares, the preferences, rights, voting powers, restrictions, limitations as to dividends, qualification or terms or redemption of, and the conversion or other rights, thereof as hereinafter set forth.
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 of directors of the Corporation is as follows:
A description, 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 are set forth in Article Six Section (6) of the Corporation's Articles of Incorporation, as amended, and have not been changed by the board of directors of the Corporation.
THIRD: The shares aforesaid have been duly classified by the sole director of the Corporation pursuant to authority and power contained in the charter of the Corporation.
IN WITNESS WHEREOF, The Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President on March 24, 1988.
ATTEST: THE FUND, INC. /s/JANE K. SAGENDORPH /s/JOE MCKEE THOMSON --------------------- -------------------- Jane K. Sagendorph Joe McKee Thomson Assistant Secretary President |
THE UNDERSIGNED, President of The Fund, Inc., who executed on behalf of said corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/JOE MCKEE THOMSON -------------------- Joe McKee Thomson President |
Exhibit 1(c)
THE FUND, INC.
ARTICLES OF AMENDMENT
The Fund, Inc., a Maryland corporation having its principal business office at
32 South Street, Baltimore, Maryland
21201 (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Articles of incorporation of the Corporation are hereby amended as follows:
Article II of the Articles of Incorporation is amended and restated to read in full as follows:
ARTICLE II
The name of the Corporation is: The RBB Fund, Inc.
SECOND: The Articles of incorporation of the Corporation are hereby further amended as follows:
Article VIII of the Articles of Incorporation is amended and restated to read in full as follows:
ARTICLE VIII
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 or officer at the time of any proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance expenses to its currently acting and its former directors to the fullest extent that indemnification of directors is permitted by the Maryland General Corporation Law. The Corporation shall indemnify and advance expenses to its officers to the same extent as its directors and to such further extent as is consistent with law. The board of Directors may by By-law, resolution or agreement make further provision for indemnification of directors, officers, employees and agents to the fullest extent permitted by the Maryland General Corporation Law.
Section 3. No provision of this Article shall be effective to protect or purport to protect any director or officer of the Corporation against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law in this Article are to the law as from time to time amended. No further amendment to the Articles of incorporation of the Corporation shall decrease, but may expand, any right of any person under this Article based on any event, omission or proceeding prior to such amendment.
THIRD: The sole director of the Corporation, by consent pursuant to Section 2-408(c) of the Maryland General Corporation Law, on May 16, 1988, duly adopted resolutions in which was set forth the foregoing amendments to the Articles of Incorporation, approving the said amendments to the Articles of Incorporation.
FOURTH: No stock entitled to vote on the foregoing amendments to the Articles of Incorporation was subscribed for at the time of the aforementioned approval.
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its President and attested by its Assistant Secretary on May 16, 1988.
(SEAL) Attest: THE FUND, INC. /s/JANE K. SAGENDORPH By:/s/JOE MCKEE THOMSON --------------------- ----------------------- Jane K. Sagendorph Joe McKee Thomson Assistant Secretary President |
The undersigned, President of The Fund, Inc., who executed on behalf of said Corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Articles of Amendment to be the corporate act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth herein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/JOE MCKEE THOMSON -------------------- Joe McKee Thomson President |
Exhibit 1(d)
THE RBB FUND, INC
ARTICLES OF SUPPLEMENTARY TO THE
ARTICLES OF INCORPORATION
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 sole director of the Corporation, an open-end company registered under the Investment Company Act of 1940, as amended, pursuant to a written consent dated June 15, 1988, adopted resolutions:
increasing the total number of shares of Common Stock of the Corporation that the Corporation has the authority to issue to ten billion (10,000,000,000) shares, par value $.001 per share, in accordance with section 2-105(b) of the Maryland General Corporation Law, and thereby increasing the aggregate par value of all shares of common stock of the Corporation to Ten Million Dollars ($10,000,000);
reclassifying one hundred million (100,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of One Hundred Thousand Dollars ($100,000), as Class A Common Stock;
reclassifying one hundred million (100,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of one Hundred Thousand Dollars ($100,000), as Class B Common Stock;
reclassifying one hundred million ($100,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of One Hundred Thousand Dollars ($100,000), as Class C Common Stock;
reclassifying one hundred million ($100,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of One Hundred Thousand Dollars ($100,000), as Class D Common Stock;
reclassifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of Five Hundred Thousand Dollars ($500,000), as Class E Common Stock;
reclassifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of Five Hundred Thousand Dollars ($500,000), as Class F Common Stock;
reclassifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of Five Hundred Thousand Dollars ($500,000), as Class G Common Stock;
reclassifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of Five Hundred Thousand Dollars ($500,000), as Class I Common Stock;
reclassifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of Five Hundred Thousand Dollars ($500,000), as Class J Common Stock;
reclassifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of Five Hundred Thousand Dollars ($500,000), as Class K Common Stock;
classifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of Five Hundred Thousand Dollars ($500,000), as Class L Common Stock;
classifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of Five Hundred Thousand Dollars ($500,000), as Class M Common Stock;
classifying five hundred million (500,000,000) of the unissued shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of Five Hundred Thousand Dollars ($500,000), as Class N Common Stock; and setting before the issuance of such shares, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption thereof as hereinafter set forth.
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 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 Articles of Incorporation, as amended, and has not been changed by the board of directors of the Corporation.
THIRD: The shares aforesaid have been duly classified and reclassified by the sole director of the Corporation pursuant to authority and power contained in the charter of the Corporation.
FOURTH: Immediately before the increase in the aggregate number of shares of stock of the Corporation that the Corporation has the authority to issue:
(a) the total number of shares of stock of all classes that the Corporation had the authority to issue was Five Billion and the aggregate par value of all the Shares of all classes was five million dollars ($5,000,000);
(b) the number of Shares of stock of each class was as
follows: Class A - one hundred million (100,000,000), par value $.001 per share;
Class B - one hundred million (100,000,000), par value $.001 per share; 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 - five hundred million
(500,000,000), par value $.001 per share; Class J - five hundred million
(500,000,000, par value $.001 per share; and Class K -five hundred million
(500,000,000), par value $.001 per share;
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President on June 15, 1988.
ATTEST THE RBB FUND, INC. /s/JANE K. SAGENDORPH /s/Joe McKee Thomson --------------------- -------------------- Jane K. Sagendorph Joe McKee Thomson Assistant Secretary President |
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed on behalf of said corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/JOE MCKEE THOMSON -------------------- Joe McKee Thomson President |
Exhibit 1(e)
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 ten billion (10,000,000,000) shares of common stock, par value $.001 per share, at a meeting held on April 24, 1990, adopted resolutions increasing the number of shares of common stock that are classified (but not increasing the aggregate number of authorized shares) into separate classes by:
classifying one billion (1,000,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of one million dollars ($1,000,000), as Class L Common Stock, which, when added to the existing five hundred million (500,000,000) authorized shares of Class L Common Stock, resulted in an aggregate of one billion five hundred million (1,500,000,000) shares of the common stock of the Corporation classified as Class L Common Stock:
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of one hundred thousand dollars ($100,000), as Class 0 Common Stock; and
classifying one hundred million (100,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of one hundred thousand dollars ($100,000), as Class P Common Stock.
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 of Directors of the Corporation is as follows:
A description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions or redemption of each class of common stock of the Corporation is set forth in Article VI, Section (6) of the Corporation's Charter, and has not-been changed by the Board of Directors of the Corporation.
THIRD: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the charter of the Corporation.
FOURTH: Immediately before the increase in the number of shares of common stock that have been classified into separate classes:
(a) the Corporation had authority to issue ten billion (10,000,000,000) shares of its common stock; and
(b) the number of shares of each authorized class of common
stock was as follows: Class A - one hundred million (100,000,000), par value
$.001 per share; Class B - one hundred million (100,000,000), par value $.001
per share; 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 - five hundred million
(500,000,000), par value $.001 per share; Class J - five hundred million
(500,000,000), par value $.001 per share; Class K - five hundred million
(S00,000,000), par value $.001 per share; Class L - five hundred million
(500,.000,000), par value $.001 per share; Class M - five hundred million
(500,000,000), par value $.001 per share; and Class N - five hundred million
(500,000,000), par value $.001 per share, for a total of five billion four
hundred million (5,400,000,000) 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 had the authority to issue ten billion (10,000,000,000) shares of its common stock; and
(d) the number of authorized shares of each class was and 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 - five hundred million
(500,000,000), 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) per share; Class O - one hundred million (100,000,000), par value
$.001 per share; Class P - one hundred million (100,000,000), par value $.001
per share, for a total of seven billion (7,000,000,000) shares classified into
separate classes of common stock.
The aggregate par value of the ten billion (10,000,000,000) authorize shares of common stock of the Corporation immediately before the increase in the number of shares that have been classified into separate classes of common stock was ten million dollars ($10,000,000). Immediately after the increase in the number of shares that have been classified into separate classes of common stock, the aggregate par value of the ten billion (10,000,000,000) authorized shares of common stock was and now is ten million dollars ($10,000,000).
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President and Secretary on April 26, 1990.
ATTEST: THE RBB FUND. INC /s/MORGAN R. JONES By: /s/JOE MCKEE THOMSON ------------------ ------------------------ Morgan R. Jones Joe McKee Thomson Secretary President |
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed on behalf of said corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, and further certifies that, to the best of his knowledge, information and belief the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/JOE MCKEE THOMSON -------------------- Joe McKee Thomson President |
Exhibit 1(f)
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 ten billion (10,000,000,000) shares of common stock, par value $.001 per share, at a meeting held on April 24, 1990, adopted resolutions increasing the number of shares of common stock that are classified (but not increasing the aggregate number of authorized shares) into separate classes by:
classifying one billion (1,000,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of one million dollars ($1,000,000), as Class L Common Stock which, when added to the existing five hundred million (500,000,000) authorized shares of Class L Common Stock resulted in an aggregate of one billion five hundred million (1,500,000,000) shares of the common stock of the common stock of the Corporation classified as Class L Common Stock;
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation. par value $.001 per share. with an aggregate par value of five hundred thousand dollars ($500,000), as Class 0 Common Stock;
classifying one hundred million (100,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of one hundred thousand dollars ($100,000), as Class P Common Stock; and
classifying one hundred million (100,000,000) of the previously authorized. unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share. with an aggregate par value of one hundred thousand dollars ($100,000), as Class Q Common Stock.
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 of Directors of the Corporation is as follows:
A description of the preferences, conversion and other rights, voting powers. Restrictions, limitations as to dividends. qualifications and terms and conditions or redemption of each class of common stock of the Corporation is set forth in Article VI, Section (6) of the Corporation's Charter, and has not been changed by the Board of Directors of the Corporation.
THIRD: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the charter of the Corporation.
FOURTH: Immediately before the increase in the number of shares of common stock that have been classified into separate classes:
(a) the Corporation had authority to issue ten billion (10,000,000,000) shares of its common stock; and
(b) the number of shares of each authorized class of common stock was as follows: Class A - one hundred million (100,000,000), par value $.001 per share; Class B - one hundred million (100,000,000), par value $.001 per share; 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 - five hundred million (500,000,000), 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 - five hundred million (500,000,000), par value $.001 per share; Class M - five hundred million (500,000,000), par value $.001 per share; and Class N - five hundred million (500,000,000), par value $.001 per share, for a total of five billion four hundred million (5,400,000,000) 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 had the authority to issue ten billion (10,000,000,000) shares of its common stock; and
(d) the number of authorized shares of each class was and is now
an 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 R - five hundred million
(500,000,000), par value $.001 per share; Class I - five hundred million
(500,000,000), par value $.001 per share; Class J - five hundred million
(500,000,000), par value $.001 per share; Class K - five hundred million
(500,000,000), par value $.001 per share; Class L - one billion five hundred
million (1,500,000,000), par value $.001 per share; Class M - five hundred
million (500,000,000), par value $.001 per share; Class N - five hundred million
(500,000,000), par value $.001 per share; Class O - five hundred million
(500,000,000), par value $.001 per share; Class P - one hundred million
(100,000,000), par value $.001 per share; and Class Q - one hundred million
(100,000,000), par value $.001 per share, for a total of seven billion one
hundred million (7,100,000,000) shares classified into separate classes of
common stock.
The aggregate par value of the ten billion (10,000,000,000) authorized shares of common stock of the Corporation immediately before the increase in the number of shares that have been classified into separate classes of common stock was ten million dollars ($10,000,000), Immediately after the increase in the number of shares that have been classified into separate classes of common stock, the aggregate par value of the ten billion (10,000,000,000) authorized shares of common stock was and now is ten million dollars ($10,000,000).
IN WITNESS WHEREOF. The RBB Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President and Secretary on April 30, 1990.
ATTEST: THE RBB FUND INC. /s/MORGAN R. JONES By:/s/JOE MCKEE THOMSON ------------------ ----------------------- Morgan R. Jones Joe McKee Thomson Secretary President |
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed on behalf of said corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/JOE MCKEE THOMSON -------------------- Joe McKee Thomson President |
Exhibit 1(g)
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, pursuant to a written consent dated October 16, 1991, adopted resolutions increasing the total number of shares of common stock of the Corporation that the Corporation has the authority to issue to thirty billion (30,000,000,000) shares, par value $.001 per share in accordance with Section 2-105(c) of the Maryland General Corporation Law, and thereby increasing the aggregate par value of all shares of common stock of the Corporation to thirty million dollars ($30,000,000);
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000), as Class R Common Stock;
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000), as Class S Common Stock;
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000), as Class Alpha 1 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000), as Class Alpha 2 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000), as Class Alpha 3 Common Stock; and
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000), as Class Alpha 4 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Beta 1 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Beta 2 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Beta 3 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Beta 4 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Gamma 1 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Gamma 2 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Gamma 3 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Gamma 4 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Delta 1 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Delta 2 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Delta 3 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Delta 4 Common Stock;
classifying five hundred million .(500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Epsilon 1 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Epsilon 2 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Epsilon 3 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Epsilon 4 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Zeta 1 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Zeta 2 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Zeta 3 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Zeta 4 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) an Eta 1 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Eta 2 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Eta 3 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Eta 4 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Theta 1 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Theta 2 Common Stock;
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Theta 3 Common Stock; and
classifying five hundred million (500,000,000) of the previously authorized unissued and unclassified shares of common stock of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000) as Theta 4 Common Stock;
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 of Directors of the Corporation is as follows:
A description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions or redemption of each class of common stock of the Corporation is set forth in Article VI, Section (6) of the Corporation's Charter, and has not been changed by the Board of Directors of the Corporation.
THIRD: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the charter of the Corporation.
FOURTH: Immediately before the increase in the number of shares of common stock of the Corporation that the Corporation has authority to issue:
(a) the Corporation had authority to issue Ten Billion (10,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes was ten million dollars ($10,000,000);
(b) the number of shares of each authorized class of common stock was as follows: Class A - one hundred million (100,000,000), par value $.001 per share; Class B - one hundred million (100,000,000), par value $.001 per share; 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 - five hundred million (500,000,000), 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 par share; Class M - five hundred million 500,000,000), par value $.001 per share; Class N - five hundred million (500,000,000), par value $.001 per share; Class 0 - five hundred million (500,000,000), par value $.001 per share; Class P - one hundred million (100,000,000), par value $.001 per share; and Class Q - one hundred million (100,000,000), par value $.001 per share, for a total of seven billion one hundred million (7,100,000,000) shares classified into separate classes of common stock.
After the increase in the number of shares of common stock of the Corporation that the corporation has authority to issue:
(c) the Corporation now has the authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes is now thirty million dollars ($30,000,000); and
(d) the number of authorized shares of each class is now as
follows: Class A one hundred million (100,000,000), par value $.001 per share;
Class B - one hundred million (100,000,000), par value $.001 per share; Class C
- one hundred million (100,000,000), par value $.001 per share; Class D - one
hundred million (100,000,000), par value $.001 per share; 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 - five hundred million
(500,000,000), 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 par share; Class M 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 0 - 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 - 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 Alpha 1 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 2 - five hundred million
(500,000,000). par value $.001 per share; Class Alpha 3 five hundred million
(500,000,000), par value $.001 per share; Class Alpha 4 - five hundred million
(500,000,000), par value $.001 per share; class Beta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 4 - five hundred million
(500,000,000), par value $.00l per share; Class Gamma 1 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 2 five hundred million
(500,000,000), par value $.001 per share; Class Gamma 3 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 4 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 1 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 2 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 3 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 4 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 4 - five hundred million
(500,000,000), par value $.001 per Share; Class Theta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 3 - five hundred million
(500,000,000), par value $.001 per share; and Class Theta 4 - five hundred
million (500,000,000), par value $.001 par share; for a total of twenty-four
billion one hundred million (24,100,000,000) shares classified into separate
classes of common stock.
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President and Secretary on November 14, 1991.
ATTEST: By: THE RBB FUND, INC. /s/MORGAN R. JONES By:/s/EDWARD J. ROACH ------------------ --------------------- Morgan R. Jones Edward J. Roach Secretary President |
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed on behalf of said corporation the foregoing Articles Supplementary to the charter, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/EDWARD J. ROACH ------------------ Edward J. Roach President |
Exhibit 1(h)
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 twenty-five billion six hundred million shares of the common stock, par value $.001 per share, at a meeting held on July 14, 1992, adopted resolutions increasing the number of shares of common stock that are classified (but not increasing the aggregate number of authorized shares) into separate classes by:
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000), as Class T Common Stock;
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock of the Corporation, par value $.001 per share with an aggregate par value of five hundred thousand dollars ($500,000), as Class U Common Stock; and
classifying five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stork of the Corporation, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000), as Class V Common Stock.
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 of Directors of the Corporation is as follows:
A description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions or redemption of each class of common stock of the Corporation is set forth in Article VI, Section (6) of the Corporation's Charter, and has not been changed by the Board of Directors of the Corporation.
THIRD: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the charter of the corporation.
FOURTH: Immediately before the increase in the number of shares of common stock that have been classified into separate classes:
(a) the Corporation had authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes was thirty million dollars ($30,000,000);
(b) the number of shares of each authorized class of common
stock was as follows: Class A - one hundred million (100,000,000), par value
$.001 per share; Class B - one hundred million (100,000,000), par value $.001
per share; 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 - five hundred million
(500,000,000), par value $.001 per share; Class J - five hundred million
(500,000,000), par value $.001 per share; Class K -five hundred million
(500,000,000), par value $.001 per share; Class L - one billion five hundred
million (1,500,000,000), par value $.001 per share; Class M - five hundred
million (500,000,000), par value $.001 per share; Class N - five hundred million
(500,000,000), par value $.001 per share; Class 0 - 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 Alpha 1 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 2 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 3 five hundred million
(500,000,000), par value $.001 per share; Class Alpha 4 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 1 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 2 -five hundred million
(500,000,000), par value $.001 per share; Class Gamma 3 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 4 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 2 -five hundred million
(500,000,000), par value $.001 per share; Class Delta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 1 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 2 -five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 3 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 4 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 3 -five hundred million
(500,000,000), par value $.001 per share; Class Zeta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 2 - five hundred million
(500,000,000) par value $.001 per share; Class Eta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 2 -five hundred million
(500,000,000). par value $.001 per share; Class Theta 3 five hundred million
(500,000,000), par value $.001 per share; and Class Theta 4 - five hundred
million (500,000,000), par value $.001 per share, for a total of twenty four
billion one hundred million (24,100,000,000) shares classified into separate
classes of common stock.
After the increase in the number of shares of common stock that have been classified into separate classes:
(c) the Corporation has the authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes is now thirty million dollars ($30,000,000); and
(d) the number of authorized shares of each class is now as
follows: Class A - one hundred million (100,000,000), par value $.001 per share;
Class B - one hundred million (100,000,000), par value $.001 per share; Class C
- one hundred million (100,000,000), par value $.001 per share; Class D - one
hundred million (100,000,000), par value $.001 per share; 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 - five hundred million
(500,000,000), par value $.001 per share; Class J five hundred million
(500,000,000), par value $.001 per share; Class K - five hundred million
(500,000,000), par value $.001 per share; Class L - one billion five hundred
million (1,500,000,000), par value $.001 per share; Class M five hundred million
(500,000,000), par value $.001 per share; Class N - five hundred million
(500,000,000), par value $.001 per share; Class 0 - 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; and Class V - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 1 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 2 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 3 -five hundred million
(500,000,000), par value $.001 per share; Class Alpha 4 - five hundred million
(500,000,000), par value $.001 per share; Class Beta I - five hundred million
(500,000,000), par value $.001 per share; Class Beta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 3 - five hundred million
(500,000,000). par value $.001 per share; Class Beta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma I five hundred million
(500,000,000), par value $.001 per share; Class Gamma 2 five hundred million
(500,000,000), par value $.001 per share; Class Gamma 3 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 4 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 1 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 2 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 3 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 4 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 2 - five hundred million
(500,000,000), par value .001 per share; Class Eta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 2 five hundred million
(500,000,000), par value $.001 per share; Class Theta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 4 - five hundred million
(500,000,000), par value $.001 per share; for a total of twenty-five billion six
hundred million (25,600,000,000) shares classified into separate classes of
common stock
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President and Secretary on July 31, 1992.
ATTEST: THE RBB FUND, INC. /s/MORGAN R. JONES By:/s/EDWARD J. ROACH ------------------ --------------------- Morgan R. Jones Edward J. Roach Secretary President |
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed an behalf of said corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made part, hereby acknowledges, in the name and on behalf of said corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/EDWARD J. ROACH ------------------ Edward J. Roach President |
Exhibit 1(i)
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 twenty-five billion seven hundred million shares of the common stock, par value $.001 per share, at a meeting held on April 24, 1993 adopted resolutions increasing the number of shares of common stock that are classified (but not increasing the aggregate number of authorized shares) into separate classes by:
classifying 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 W Common Stock.
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 of Directors of the Corporation is as follows:
A description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions or redemption of each class of common stock of the corporation is set forth in Article VI, Section (6) of the Corporation's Charter, and has not been changed by the Board of Directors of the corporation.
THIRD: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the charter of the Corporation.
FOURTH: Immediately before the increase in the number of shares of common stock that have been classified into separate classes:
(a) the Corporation had authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes was thirty million dollars ($30,000,000);
(b) the number of shares of each authorized class of common
stock was an follows: Class A one hundred million (100,000,000), par value
$.001 par share; Class 3 - 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 par 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 - five
hundred million (500,000,000), par value $.001 per share; Class J - five
hundred million (500,000,000), par value $.001 per share; Class R - 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 N - five
hundred million (500,000,000), par value $.001 per share; Class N - five
hundred million (500,000,000), par value $.001 par share; Class 0 - 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 V - five hundred million
(500,000,000), par value $.001 per share; Class V - five hundred million
(500,000,000), par value $.00l per share; Class Alpha 1 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 2 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 3 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 4 - five hundred million
(500,000,000), par value $.001 per share, Class Data 1 - five hundred million
(500,000,000), par value $.001 per share; Class Data 2 - five hundred million
(500,000,000), par value $.001 per share; Class Data 3 - five hundred million
(500,000,000), par value $.001 per share; Class Data 4 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 1 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 2 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 3 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 4 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 1 - five hundred
million (500,000,000), par value $.001 per share; Class Epsilon 2 - five
hundred million (500,000,000), par value $.001 per share; Class Epsilon 3 five
hundred million (500,000,000), par value $.001 per share; Class Epsilon 4 -
five hundred million (500,000.000), par value $.001 per share; Class Zeta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 2 -
five hundred million (500,000,000) par value $.00l per share; Class Eta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Theta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Theta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Theta 3 -
five hundred million (500,000,000) , par value $.001 per share; and Class Theta
4 - five hundred million (500,000,000), par value $.001 per share, for a total
of twenty-five billion six hundred million (25,600,000,000) shares classified
into separate classes of common stock.
After the increase in the number of shares of common stock that have been classified into separate classes:
(c) the Corporation has the authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes is now thirty million dollars ($30,000,000); and
(d) the number of authorized shares of each class is now as
follows: Class A - one hundred million (100,000,000), par value $.001 per
share; Class B - one hundred million (100,000,000), par value $.001 per share;
Class C - one hundred million (100,000,000), par value $.001 per share; Class D
- one hundred million (100,000,000), par value $.001 per share; 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 $.00l per share; Class H - five hundred
million (500,000,000), par value $.001 per share; Class I - five hundred
million (500,000,000), par value $.001 par 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 P - five hundred
million (500,000,000), par value $.001 per share; Class 0 - 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 O - 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 Alpha 1 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 2 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 3 - five hundred million
(500,000,000), par value $.001 par share; Class Alpha 4 - five hundred million
(500,000,000), par value $.001 per share; Class Data 1 - five hundred million
(500,000,000), par value $.001 per share; Class Data 2 - five hundred million
(500,000,000), par value $.001 per share; Class Data 3 - five hundred million
(500,000,000), par value $.001 per share; Class Data 4 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 1 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 2 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 3 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 4 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 1 - five hundred
million (500,000,000), par value $.001 per share; Class Epsilon 2 - five
hundred million (500,000,000), par value $.001 per share; Class Epsilon 3 -
five hundred million (500,000,000), par value $.001 par share; Class Epsilon 4
- five hundred million (500,000,000), par value $.001 par share; Class Zeta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 3
five hundred million (500,000,000), par value $.001 per share; Class Zeta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 2 -
five hundred million (500,000,000) par value $.001 per share; Class Eta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Theta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Theta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Theta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Theta 4
five hundred million (500,000,000), par value $.001 per share; for a total of
twenty-five billion seven hundred million (25,700,000,000) shares classified
into separate classes of common stock.
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President and Secretary on July 21, 1993.
ATTEST: THE RBB FUND, INC. /s/MORGAN R. JONES By:/s/EDWARD J. ROACH ------------------ --------------------- Morgan R. Jones Edward J. Roach Secretary President |
THE UNDERSIGNED, President or The RBB Fund, Inc., who executed on behalf of said corporation the foregoing Articles Supplementary to the Charter, of which this certificate in made a part, hereby acknowledges, in the name and on behalf or 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.
/s/EDWARD J. ROACH ------------------ Edward J. Roach President |
Exhibit 1(j)
THE RBB FUND, I
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 twenty-five billion nine hundred million shares of the common stock, par value $.001 per share, at a meeting held an July 21, 1993, adopted resolutions increasing the number of shares of common stock that are classified (but not increasing the aggregate number of authorized shares) into separate classes by:
classifying fifty million (50,000,000) of the previously authorized, unissued and unclassified shares of the common stock, par value $.001 per share, with an aggregate par value of fifty thousand dollars ($50,000), as Class X Common Stock;
classifying fifty million (50,000,000) of the previously authorized, unissued and unclassified shares of the common stock, par value $.001 per share, with an aggregate par value of fifty thousand dollars ($50,000), as Class Y Common Stock;
classifying fifty million (50,000,000) of the previously authorized, unissued and unclassified shares of the common stock, par value $.001 per share, with an aggregate par value of fifty thousand dollars ($50,000), as Class Z Common Stock; and
classifying fifty million (50,000,000) of the previously authorized,, unissued and unclassified shares of the common stock, par value $.001 per share, with an aggregate par value of fifty thousand dollars ($50,000), as Class AA Common Stock.
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 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 hot been changed by the Board of Directors of the Corporation.
THIRD: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the charter of the Corporation.
FOURTH: Immediately before the increase in the number of shares of common stock that have been classified into separate classes:
(a) the Corporation had authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes was thirty million dollars ($30,000,000);
(b) the number of shares of each authorized class of
common stock was as follows: Class A - one hundred million (100,000,000), par
value $.001 per share; Class B - one hundred million (100,000,000), par value
$.001 per share; 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 five hundred
million (500,000,000), par value $.001 per share; Class J - five hundred million
(500,000,000), par value $.001 per share; Class K -five hundred million
(500,000,000), par value $.001 per share; Class L - one billion five hundred
million (1,500,000,000), par value $.001 per share; Class M - five hundred
million (500,000,000), par value $.001 per share; Class N - five hundred million
(500,000,000), par value $.001 per share; Class 0 - 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 Alpha 1 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 2 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 3 - five hundred million
(500,000,000), par value $.001 per share; Class Alpha 4 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Beta 3 - five hundred million
(500,000,0OO), par value $.001 per share; Class Beta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 1 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 2 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 3 - five hundred million
(500,000,000), par value $.001 per share; Class Gamma 4 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Delta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 1 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 2 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 3 - five hundred million
(500,000,000), par value $.001 per share; Class Epsilon 4 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 3 - five hundred million
(500,000,000), par value $.001 per share; Class Zeta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Eta 2 - five hundred million
(500,000,000) par value $.001 per share; Class Eta 3 five hundred million
(500,000,0OO), par value $.001 per share; Class Eta 4 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 1 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 2 - five hundred million
(500,000,000), par value $.001 per share; Class Theta 3 - five hundred million
(500,000,000) par value $.001 per share; and Class Theta 4 - five hundred
million (500,000,000), par value $.001 per share, for a total of twenty-five
billion seven hundred million (25,700,000,000) shares classified into separate
classes of common stock.
After the increase in the number of shares of common stock that have been classified into separate classes:
(c) the Corporation has the authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes is now thirty million dollars ($30,000,000); and
(d) the number of authorized shares of each class is now
as follows: Class A - one hundred million (100,000,000), par value $.001 per
share; Class B - one hundred million (100,000,000), par value $.001 per share;
Class C - one hundred million (100,000,000), par value $.001 per share; Class D
- one hundred million (100,000,000), par value $.001 per share; 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 five hundred million
(500,000,000), par value $.001 per share; Class J - five hundred million
(500,000,000), par value $.001 per share; Class K - five hundred million
(500,000,000), par value $.001 per share; Class L - one billion five hundred
million (1,500,000,000), par value $.001 per share; Class M - five hundred
million (500,000,000), par value $.001 per share; Class N - five hundred million
(500,000,000), par value $.001 per share; Class 0 - 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 (5O,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 Alpha 1
- five hundred million (500,000,000), par value $.001 per share; Class Alpha 2 -
five hundred million (500,000,000), par value $.001 per share; Class Alpha 3 -
five hundred million (500,000,000), par value $.001 per share; Class Alpha 4 -
five hundred million (500,000,000), par value $.001 per share; Class Beta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Beta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Beta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Beta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Gamma 1 -
five hundred million (500,000,000), par value $.001 per share; Class Gamma 2 -
five hundred million (500,000,000), par value $.001 per share; Class Gamma 3 -
five hundred million (500,000,000), par value $.001 per share; Class Gamma 4 -
five hundred million (500,000,000), par value $.001 per share; Class Delta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Delta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Delta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Delta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Epsilon 1 -
five hundred million (500,000,000), par value $.001 per share; Class Epsilon 2 -
five hundred million (500,000,000), par value $.001 per share; Class Epsilon 3 -
five hundred million (500,000,000), par value $.001 per share; Class Epsilon 4 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 2 -
five hundred million (500,000,000) par value $.001 per share; Class Eta 3 - five
hundred million (500,000,000), par value $.001 per share; Class Eta 4 - five
hundred million (500,000,000), par value $.001 per share; Class Theta 1 five
hundred million (500,000,000), par value $.001 per share; Class Theta 2 - five
hundred million (500,000,000), par value $.001 per share; Class Theta 3 - five
hundred million (500,000,000), par value $.001 per share; Class Theta 4 - five
hundred million (500,000,000), par value $.001 per share; for a total of
twenty-five billion nine hundred million (25,900,000,000) shares classified into
separate classes of common stock.
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these
presents to be signed and attested in its name and on its behalf
by its President and Secretary on September 30, 1993.
THE RBB FUND, INC.
ATTEST:
/s/MORGAN R. JONES By:/s/EDWARD J. ROACH ------------------ --------------------- Morgan R. Jones Edward J. Roach Secretary President |
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed on behalf of said corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/EDWARD J. ROACH ------------------ Edward J. Roach President |
Exhibit 1(k)
THE RBB FUND, INC.
ARTICLES SUPPLEMENTARY TO THE
CHARTER
THE RBB FUND, INC., a Maryland corporation having its principal office in Baltimore, Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, an open-end investment company registered under the Investment Company Act of 1940, as amended, and having authorized capital of thirty billion (30,000,000,000) shares of common stock, par value $.001 per share, has adopted a unanimous resolution increasing the number of shares of common stock that are classified (but not increasing the aggregate number of authorized shares) into separate classes by:
classifying an additional five hundred million (500,000,000) of the previously authorized, unissued and unclassified shares of the common stock, par value $.001 per share, with an aggregate par value of five hundred thousand dollars ($500,000), as Class I Common Stock (Sansom Street Money Market);
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 not or changed by the Board of Directors of the corporation is as follows:
A description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions or redemption of each class of common stock of the Corporation is set forth in Article VI, Section (6) of the Corporation's Charter, and has not been changed by the Board of Directors of the Corporation.
THIRD: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the charter of the Corporation.
FOURTH: Immediately before the increase in the number of shares of common stock that have been classified into separate classes:
(a) the Corporation had authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes was thirty million dollars ($30,000,000);
(b) the number of shares of each authorized class of
common stock was as follows: Class A one hundred million (100,000,000), par-
value $.001 per share; Class B - one hundred million (100,000,000), par value
$.001 per share; 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 - five hundred
million (500,000,000), par value $.001 per share; Class J - five hundred million
(500,000,000), par value $.001 per share; Class K - five hundred million
(500,000,000), par value $.001 per share; Class L - one billion five hundred
million (1,500,000,000), par value $.001 per share; Class M - five hundred
million (500,000,000), par value $.001 per share; Class N - five hundred million
(500,000,000), par value $.001 per share; Class 0 - 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 Alpha 1
- one million (1,000,000), par value $.001 per share; Class Alpha 2 - one
million (1,000,000), par value $.001 per share; Class Alpha 3 - one million
(1,000,000), par value $.001 per share; Class Alpha 4 - one million (1,000,000),
par value $.001 per share; Class Beta 1 - one million (1,000,000), par value
$.001 per share; Class Beta 2 - one million (1,000,000), par value $.001 per
share; Class Beta 3 - one million (1,000,000), par value $.001 per share; Class
Beta 4 - one million (1,000,000), par value $.001 per share; Class Gamma 1 - one
million (1,000,000), par value $.001 per share; Class Gamma 2 - one million
(1,000,000), par value $.001 per share; Class Gamma 3 - one million (1,000,000),
par value $.001 per share; Class Gamma 4 - one million (1,000,000), par value
$.001 per share; Class Delta 1 - one million (1,000,000), par value $.001 per
share; Class Delta 2 - one million (1,000,000), par value $.001 per share; Class
Delta 3 - one million (1, 000,000), par value $.001 per share; Class Delta 4 -
one million (1,000,000), par value $.001 per share; Class Epsilon 1 - five
hundred million (1,000,000), par value $.001 per share; Class Epsilon 2 - one
million (1,000,000), par value $.001 per share; Class Epsilon 3 - one million
(1,000,000), par value $.001 per share; Class Epsilon 4 - one million
(1,000,000), par value $.001 per share; Class Zeta 1 - one million (1,000,000),
par value $.001 per share; Class Zeta 2 - one million (1,000,000), par value
$.001 per share; Class Zeta 3 - one million (1,000,000), par value $.001 per
share; Class Zeta 4 - one hundred million (100,000,000), 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 nine billion nine hundred thirty-two million (9,932,000,000)
shares classified into separate classes of common stock.
After the increase in the number of shares of common stock that have been classified into separate classes:
(c) the Corporation has the authority to issue thirty
billion (30,000,000,000) shares of its common stock and the aggregate par value
of all the shares of all classes is now thirty million dollars ($30,000,000);
and
(d) the number of authorized shares of each class is now
as follows: Class A - one hundred million (100,000,000), par value $.001 per
share; Class B - one hundred million (100,000,000), par value $.001 per share;
Class C - one hundred million (100,000,000), par value $.001 per share; Class D
- one hundred million (100,000,000), par value $.001 per share; Class E -one
billion (1,000,000,000), par value $.001 per share; Class F - five hundred
million (500,000,000), par value $.001 per share; Class G - five hundred million
(500,000,000), par value $.001 per share; Class H - five hundred million
(500,000,000), par value $.001 per share; Class I - one billion (1,000,000,000),
par value $.001 per share; Class J - five hundred million (500,000,000), par
value $.001 per share; Class K - five hundred million (500,000,000), par value
$.001 per share; Class L - one billion five hundred million (1,500,000,000), par
value $.001 per share; Class M - five hundred million (500 000,000), par value
$.001 per share; Class N - five hundred million (500,000,000), par value $.001
per share; Class 0 - 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 Alpha 1
- one million (1,000,000), par value $.001 per share; Class Alpha 2 - one
million (1,000,000), par value $.001 per share; Class Alpha 3 - one million
(1,000,000), par value $.001 per share; Class Alpha 4 - one million (1,000,000),
par value $.001 per share; Class Beta 1 - one million (1,000,000), par value
$.001 per share; Class Beta 2 - one million (1,000,000), par value $.001 per
share; Class Beta 3 - one million (1,000,000), par value $.001 per share; Class
Beta 4 - one million (1,000,000), par value $.001 per share; Class Gamma 1 - one
million (1,000,000), par value $.001 per share; Class Gamma 2 - one million
(1,000,000), par value $.001 per share; Class Gamma 3 - one million (1,000,000),
par value $.001 per share; Class Gamma 4 - one million (1,000,000), par value
$.001 per share; Class Delta 1 - one million (1,000,000), par value $.001 per
share; Class Delta 2 - one million (1,000,000), par value $.001 per share; Class
Delta 3 - one million (1,000,000), par value $.001 per share; Class Delta 4 -
one million (1,000,000), par value $.001 per share; Class Epsilon 1 - one
million (1,000,000), par value $.001 per share; Class Epsilon 2 - one million
(1,000,000), par value $.001 per share; Class Epsilon 3 - one million
(1,000,000), par value $.001 per share; Class Epsilon 4 - one million
(1,000,000), par value $.001 per share; 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; for a total of ten
billion four hundred thirty-two million (10,432,000,000) shares classified into
separate classes of common stock.
IN WITNESS WHEREOF, The RBS Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President and Secretary on
October 5, 1994 ATTEST: THE RBB FUND, INC. /s/MORGAN R. JONES /s/EDWARD J. ROACH ------------------ ------------------ Morgan R. Jones Edward J. Roach Secretary President |
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed an behalf of said corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/EDWARD J. ROACH ------------------ Edward J. Roach President |
Exhibit 1(l)
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, par value $.001 per share, at a meeting held an January 26, 1994 adopted resolutions reclassifying the authorized and unissued shares of common stock that are classified into separate classes by: reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Class Alpha 1, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000) as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Class Alpha 2, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Class Alpha 3, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), an unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Class Alpha 4, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Class Beta 1, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.00l per share, with an aggregate par value of four hundred ninety nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Beta 2, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized, and unissued Common Stock of the Corporation, classified as Beta 3 par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Beta 4 par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine, thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Gamma 1, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand
dollars ($499,000) as unclassified shares of the Common Stock of the Corporation, par value $.00l per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Gamma 2, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Gamma 3, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Gamma 4, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Delta 1, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Delta 2, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Delta 3, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000). reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the corporation, classified an Delta 4, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Epsilon 1, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Epsilon 2, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Epsilon 3, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), an unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Epsilon 4, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Zeta 1, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Zeta 2, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Zeta 3, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the
Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Zeta 4, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Eta 1, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Eta 2, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Eta 3, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Eta 4, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Theta 1, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Theta 2, Par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Theta 3, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); reclassifying four hundred ninety-nine million (499,000,000) shares of the previously authorized and unissued Common Stock of the Corporation, classified as Theta 4, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000), as unclassified shares of the Common Stock of the Corporation, par value $.001 per share, with an aggregate par value of four hundred ninety-nine thousand dollars ($499,000); and
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 net or changed by the Board of Directors of the Corporation is as follows:
A description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions or redemption of each class of common stock of the Corporation in set forth in Article VI, Section (6) of the Corporation's Charter, and has not been changed by the Board of Directors of the Corporation.
THIRD: The shares aforesaid have been duly reclassified 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 reclassified into unclassified Common Stock of the Corporation:
(a) the Corporation had authority to issue Thirty Billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes was thirty million dollars ($30,000,000);
(b) the number of shares of each authorized class of
common stock was as follows: Class A - one hundred million (100,000,000), par
value $.001 per share; Class B - one hundred million (l00,000,000), 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 (5O0,000,000), par value $.001 per share;
Class P - 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 - five hundred
million (500,000,000), 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 K five hundred million
(500,000,000), par value $.001 per share; Class 0 - five hundred million
(500,000,000), par value $.001 per share; Class P - one hundred million
(100,000,000), par value $.001 per share; and 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 $.00l 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 Alpha 1
- five hundred million (500,000,000), par value $.001 per share; Class Alpha 2 -
five hundred million (500,000,000), par value $.001 per share; Class Alpha 3 -
five hundred million (500,000,000), par value $.001 per share; Class Alpha 4 -
five hundred million (500,000,000), par value $.001 per share; Class Beta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Beta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Beta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Beta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Gamma 1 -
five hundred million (500,000,000), par value $.001 per share; Class Gamma 2 -
five hundred million (500,000,000), par value $.001 per share; Class Gamma 3 -
five hundred million (500,000,000), par value $.001 per share; Class Gamma 4 -
five hundred million (500,000,000), par value $.001 per share; Class Delta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Delta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Delta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Delta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Epsilon 1 -
five hundred million (500,000,000), par value $.001 per share; Class Epsilon 2 -
five hundred million (500,000,000), par value $.001 per share; Class Epsilon 3 -
five hundred million (500,000,000), par value $.001 per share; Class Epsilon 4
five hundred million (500,000,000), par value $.001 per share; Class Zeta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 2 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 3 -
five hundred million (500,000,000), par value $.001 per share; Class Zeta 4 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 1 -
five hundred million (500,000,000), par value $.001 per share; Class Eta 2 -
five hundred million (500,000,000) par value $.001 per share; Class Eta 3 - five
hundred million (500,000,000), par value $.001 per share; Class Eta 4 - five
hundred million (500,000,000), par value $.001 per share; Class Theta 1 - five
hundred million (500,000,000), par value $.001 per share; Class Theta 2 - five
hundred million (500,000,000), par value $.001 per share; Class Theta 3 - five
hundred million (500,000,000), par value $.001 per share; and Class Theta 4 -
five hundred million (500,000,000), par value $.001 per share, for a total of
twenty-five billion nine hundred million (25,900,000,000) shares classified into
separate classes of common stock.
After the number of shares of common stock that have been reclassified into separate classes:
(c) the Corporation has the authority to issue thirty
billion (30,000,000,000) shares of its common stock and the aggregate par value
of all the shares of all classes is now thirty million dollars ($30,000,000);
and
(d) the number of authorized shares of each class is now
as follows: Class A - one hundred million (100,000,000), par value $.001 per
share; Class B one hundred million (100,000,000), par value $.001 per share;
Class C - one hundred million (100,000,000), par value $.001 per share; Class D
- one hundred million (100,000,000), par value $.001 per share; Class E - one
billion (1,000,000,000), 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 - five hundred million
(500,000,000), par value $.001 per share; Class J - five hundred million
(500,000,000), par value $.001 per share; Class K - five hundred million
(500,000,000), par value $.001 per share; Class L - one billion five hundred
million (1,500,000,000), par value $.001 per share; Class M - five hundred
million (500,000,000), par value $.001 per share; Class N - five hundred million
(500,000,000), par value $.001 per share; Class 0 - 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 Alpha 1
-one million (1,000,000), par value $.001 per share; Class Alpha 2 - one million
(1,000,000), par value $.001 per share; Class Alpha 3 - one million (1,000,000),
par value $.001 per share; Class Alpha 4 - one million (1,000,000), par value
$.001 per share; Class Beta 1 - one million (1,000,000), par value $.001 per
share; Class Beta 2 - one million (1,000,000), par value $.001 per share; Class
Beta 3 - one million (1,000,000), par value $.001 per share; Class Beta 4 - one
million (1,000,000), par value $.001 per share; Class Gamma 1 - one million
(1,000,000), par value $.001 per share; Class Gamma 2 - one million (1,000,000),
par value $.001 per share; Class Gamma 3 - one million (1,000,000), par value
$.001 per share; Class Gamma 4 - one million (1,000,000), par value $.001 per
share; Class Delta 1 - one million (1,000,000), par value $.001 per share; Class
Delta 2 - one million (1,000,000), par value $.001 per share; Class Delta 3 -
one million (1,000,000), par value $.001 per share; Class Delta 4 - one million
(1,000,000), par value $.001 per share; Class Epsilon 1 - one million
(1,000,000), par value $.001 per share; Class Epsilon 2 - one million
(1,000,000), par value $.001 per share; Class Epsilon 3 - one million
(1,000,000), par value $.001 per share; Class Epsilon 4 one million (1,000,000),
par value $.001 per share; 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; for a total of nine billion
nine hundred thirty two million (9,932,000,000) shares classified into separate
classes of common stock.
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President and Secretary on October 5, 1994
ATTEST: THE RBB FUND, INC. /s/MORGAN R. JONES By:/s/EDWARD J. ROACH ------------------ --------------------- Morgan R. Jones Edward J. Roach Secretary President |
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed an behalf of said corporation the foregoing Articles supplementary to the Charter, of which this certificate in made a part, hereby acknowledges, in the name and on behalf of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/EDWARD J. ROACH ------------------ Edward J. Roach President |
Exhibit 1(m)
THE RBB FUND, INC.
ARTICLES SUPPLEMENTARY TO THE
CHARTER
THE RBB FUND, INC., a Maryland corporation having its principal office in Baltimore, Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, an open-end investment company registered under the Investment Company Act of 1940, as amended, and having authorized capital of thirty billion (30,000,000,000) shares of common stock, par value $.001 per share, has adopted a unanimous resolution increasing the number of shares of common stock that are classified (but not increasing the aggregate number of authorized shares) into separate classes by:
classifying an additional fifty million (50,000,000) of the previously authorized, unissued and unclassified shares of the common stock, par value $.001 per share, with an aggregate par value of fifty thousand dollars ($50,000), as Class BB Common Stock (BEA Balanced);
classifying an additional fifty million (50,000,000) of the previously authorized, unissued and unclassified shares of the common stock, par value $.001 per share, with an aggregate par value of fifty thousand dollars ($50,000), as Class CC Common Stock (BEA Short Duration);
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 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 as set forth in Article VI, Section (6) of the Corporation's Charter, and has not been changed by the Board of Directors of the corporation.
THIRD: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the charter of the Corporation.
FOURTH: Immediately before the increase in the number of shares of common stock that have been classified into separate classes:
(a) the Corporation had authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes was thirty million dollars ($30,000,000);
(b) the number of authorized shares of each class was as
follows: Class A - one hundred million (100,000,000), par value $.001 per share;
Class B - one hundred million (100,000,000), par value $.001 per share; 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 - one billion
(1,000,000,000), par value $.001 per share; Class F -five hundred million
(500,000,000), par value $.001 per share; Class G - five hundred million
(500,000,000), par value $.001 per share; Class H - five hundred million
(500,000,000), par value $.001 per share; Class I - one billion (1,000,000,000),
par value $.001 per share; Class J - five hundred million (500,000,000), par
value $.001 per share; Class K - five hundred million (500,000,000), par value
$.001 per share; Class L - one billion five hundred million (1,500,000,000), par
value $.001 per share; Class M - five hundred million (500,000,000), par value
$.001 per share; Class N - five hundred million (500,000,000), par value $.001
per share; Class 0 - 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 Alpha 1
- one million (1,000,000), par value $.001 per share; Class Alpha 2 one million
(1,000,000) , par value $.001 per share; Class Alpha 3 - one million
(1,000,000), par value $.001 per share; Class Alpha 4 one million (1,000,000),
par value $.001 per share; Class Beta 1 - one million (1,000,000), par value
$.001 per share; Class Beta 2 - one million (1,000,000), par value $.001 per
share; Class Beta 3 - one million (1,000,000), par value $.001 per share; Class
Beta 4 - one million (1,000,000), par value $.001 per share; Class Gamma 1 - one
million (1,000,000), par value $.001 per share; Class Gamma 2 - one million
(1,000,000), par value $.001 per share; Class Gamma 3 one million (1,000,000),
par value $.001 per share; Class Gamma 4 - one million (1,000,000), par value
$.001 per share; Class Delta 1 - one million (1,000,000), par value $.001 per
share; Class Delta 2 - one million (1,000,000), par value $.001 per share; Class
Delta 3 - one million (1,000,000), par value $.001 per share; Class Delta 4 -
one million (1,000,000), par value $.001 per share; Class Epsilon 1 - one
million (1,000,000), par value $.001 per share; Class Epsilon 2 - one million
(1,000,000), par value $.001 per share; Class Epsilon 3 - one million
(1,000,000), par value $.001 per share; Class Epsilon 4 - one million
(1,000,000), par value $.001 per share; 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; for a total of ten
billion four hundred thirty-two million (10,432,000,000) shares classified into
separate classes of common stock.
FIFTH: After the increase in the number of shares of common stock that have been classified into separate classes shall be as follows:
(a) the Corporation shall have the authority to issue thirty billion (30,000,000,000), shares of its common stock and the aggregate par value of all the shares of all classes is now thirty million dollars ($30,000,000); and
(b) 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 - one billion
(1,000,000,000), par value $.001 per share; Class F -five hundred million
(500,000,000), par value $.001 per share; Class G - five hundred million
(500,000,000), par value $.001 per share; Class H - five hundred million
(500,000,000), par value $.001 per share; Class I - one billion (1,000,000,000),
par value $.001 per share; Class J - five hundred million (500,000,000), par
value $.001 per share; Class K - five hundred million (500,000,000), par value
$.001 per share; Class L - one billion five hundred million (1,500,000,000), par
value $.001 per share; Class M - five hundred million (500,000,000), par value
$.001 per share; Class N - five hundred million (500,000,000), par value $.001
per share; Class 0 - 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 share; Class CC - fifty million
(50,000,000), par value $.001 per share; Class Alpha 1 - one million
(1,000,000), par value $.001 per share; Class Alpha 2 - one million (1,000,000),
par value $.001 per share; Class Alpha 3 - one million (1,000,000), par value
$.001 per share; Class Alpha 4 - one million (1,000,000), par value $.001 per
share; Class Beta 1 - one million (1,000,000), par value $.001 per share; Class
Beta 2 -one million (1,000,000), par value $.001 per share; Class Beta 3 - one
million (1,000,000), par value $.001 per share; Class Beta 4 -one million
(1,000,000), par value $.001 per share; Class Gamma 1 - one million (1,000,000),
par value $.001 per share; Class Gamma 2 - one million (1,000,000), par value
$.001 per share; Class Gamma 3 - one million (1,000,000), par value $.001 per
share; Class Gamma 4 - one million (1,000,000), par value $.001 per share; Class
Delta 1 - one million (1,000,000), par value $.001 per share; Class Delta 2 -
one million (1,000,000), par value $.001 per share; Class Delta 3 - one million
(1,000,000), par value $.001 per share; Class Delta 4 - one million (1,000,000),
par value $.001 per share; Class Epsilon 1 - one million (1,000,000), par value
$.001 per share; Class Epsilon 2 - one million (1,000,000), par value $.001 per
share; Class Epsilon 3 - one million (1,000,000), par value $.001 per share;
Class Epsilon 4 - one million (1,000,000), par value $.001 per share; 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; for a total of ten billion five hundred thirty-two million
(10,532,000,000) shares classified into separate classes of common stock.
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed and attested in its name and an its behalf by its President and Secretary on October 26, 1994
ATTEST: THE RBB FUND, INC. /s/MORGAN R. JONES /s/EDWARD J. ROACH ------------------ ------------------ Morgan R. Jones Edward J. Roach Secretary President |
Exhibit 1(n)
THE RBB FUND, INC.
ARTICLES SUPPLEMENTARY TO THE
CHARTER
THE RBB FUND, INC., a Maryland corporation having its principal office in Baltimore, Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, an open-end investment company registered under the Investment Company Act of 1940, as amended, and having authorized capital of thirty billion (30,000,000,000) shares of common stock, par value $.001 per share, has adopted a unanimous resolution increasing the number of shares of common stock that are classified (but not increasing the aggregate number of authorized shares) into separate classes by:
classifying an additional one hundred million (100,000,000) of the previously authorized, unissued and unclassified shares of the common stock, par value $.001 per share, with an aggregate par value of fifty thousand dollars ($50,000), as Class DD Common Stock (Warburg Pincus Growth & Income Series 2);
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 fifty thousand dollars ($50,000), as Class EE Common Stock (Warburg Pincus Balanced Series 2);
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 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; PROVIDED HOWEVER that only the Series 2 Class Shares of the Warburg Pincus Growth & Income and Warburg Pincus Balanced Funds shall be permitted to vote on distribution and shareholder servicing arrangements with financial institutions which pertain solely to said Series 2 Classes of shares.
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 authorized shares of each class was as follows:
Class A - one hundred million (100,000,000), par value $.001 per share; Class B
- one hundred million (100,000,000), par value $.001 per share; 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 - one billion
(1,000,000,000), par value $.001 per share; Class F - five hundred million
(500,000,000), par value $.001 per share; Class G - five hundred million
(500,000,000), par value $.001 per share; Class H - five hundred million -
(500,000,000), par value $.001 per share; Class I - one billion (1,000,000,000),
par value $.001 per share; Class J - five hundred million (500,000,000), par
value $.001 per share; Class K - five hundred million (500,000,000), par value
$.001 per share; Class L - one billion five hundred million (1,500,000,000), par
value $.001 per share; Class M - five hundred million (500,000,000), par value
$.001 per share; Class N - five hundred million (500,000,000), par value $.001
per share; Class O - five hundred million (500,000,000), par value $.001 per
share; Class P - one hundred million (100,000,000), par value $.001 per share;
Class Q - one hundred million (100,000,000), par value $.001 per share; Class R
- five hundred million (500,000,000), par value $.001 per share; Class S - five
hundred million (500,000,000), par value $.001 per share; Class T - five hundred
million (500,000,000), par value $.001 per share; Class U - five hundred million
(500,000,000), par value $.001 per share; Class V - five hundred million
(500,000,000), par value $.001 per share; Class W one hundred million
(100,000,000), par value $.001 per share; Class X fifty million (50,000,000),
par value $.001 per share; Class Y fifty million (50,000,000), par value $.001
per share; Class Z fifty million (50,000,000), par value $.001 per share; Class
AA - fifty million (50,000,000), par value $.001 per share; Class BB - fifty
million (50,000,000), par value $.001 per share; Class CC - fifty million
(50,000,000), par value $.001 per share; Class Alpha 1 - one million
(1,000,000), par value $.001 per share; Class Alpha 2 one million (1,000,000),
par value $.001 per share; Class Alpha 3 - one million (1,000,000), par value
$.001 per share; Class Alpha 4 - one million (1,000,000), par value $.001 per
share; Class Beta 1 - one million (1,000,000), par value $.001 per share; Class
Beta 2 - one million (1,000,000), par value $.001 per share; Class Beta 3 - one
million (1,000,000), par value $.001 per share; Class Beta 4 - one million
(1,000,000), par value $.001 per share; Class Gamma 1 - one million (1,000,000),
par value $.001 per share; Class Gamma 2 - one million (1,000,000), par value
$.001 per share; Class Gamma 3 one million (1,000,000), par value $.001 per
share; Class Gamma 4 - one million (1,000,000), par value $.001 per share; Class
Delta 1 - one million (1,000,000), par value $.001 per share; Class Delta 2 -
one million (1,000,000), par value $.001 per share; Class Delta 3 - one million
(1,000,000), par value $.001 per share; Class Delta 4 - one million (1,000,000),
par value $.001 per share; Class Epsilon 1 - one million (1,000,000), par value
$.001 per share; Class Epsilon 2 - one million (1,000,000), par value $.001 per
share; Class Epsilon 3 - one million (1,000,000), par value $.001 per share;
Class Epsilon 4 - one million (1,000,000), par value $.001 per share; 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; for a total of ten billion five hundred thirty-two million
(10,532,000,000) shares classified into separate classes of common stock.
FIFTH: After the increase in the number of shares of common stock that have been classified into separate classes shall be as follows:
(a). the Corporation shall have the authority to issue thirty billion (30,000,000,000) shares of its common stock and the aggregate par value of all the shares of all classes is now thirty million dollars ($30,000,000); and
(b) 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 - one billion
(1,000,000,000), par value $.001 per share; Class F - five hundred million
(500,000,000), par value $.001 per share; Class G - five hundred million
(500,000,000), par value $.001 per share; Class H - five hundred million
(500,000,000), par value $.001 per share; Class I - one billion (1,000,000,000),
par value $.001 per share; Class J - five hundred million (500,000,000), par
value $.001 per share; Class K - five hundred million (500,000,000), par value
$.001 per share; Class L - one billion five hundred million (1,500,000,000), par
value $.001 per share; Class M - five hundred million (500,000,000), par value
$.001 per share; Class N - five hundred million (500,000,000), par value $.001
per share; Class 0 - 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 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 Alpha 1 - one hundred million
((100,000,000), par value $.001 per share; Class Alpha 2 - one hundred million
((100,000,000), par value $.001 per share; Class Alpha 3 - one hundred million
(100,000,000), par value $.001 per share; Class Alpha 4 - one hundred million
((100,000,000), par value $.001 per share; Class Beta 1 - one hundred million
((100,000,000), 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; Class Gamma 2 - one million (1,000,000), par value $.001 per share; Class
Gamma 3 - one million.(l,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
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; for a total of ten
billion seven hundred thirty-two million (10,732,000,000) shares classified into
separate classes of common stock.
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed and attested in its name and on its behalf by its President and Secretary on October 26, 1994.
ATTEST: THE RBB FUND, INC. /s/MORGAN R. JONES /s/EDWARD J. ROACH ------------------ ------------------ Morgan R. Jones Edward J. Roach Secretary President |
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 part, hereby acknowledges, in the name and an behalf of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/EDWARD J. ROACH ------------------ Edward J. Roach President |
Exhibit 5(a)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
(Money Portfolio)
AGREEMENT made as of August 16, 1988 between THE RBB FUND, INC., a Maryland corporation (herein called the "Company"), and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (herein called the "Investment Advisor").
WHEREAS, the Company is registered as an open-end, diversified, management investment company under the Investment Company Act of 1940 (the "1940 Act") and currently offers shares representing interests in seven separate investment portfolios; and
WHEREAS, the Company desires to retain the Investment Advisor to render investment advisory and administration services with respect to the Company's Money Market Portfolio (the "Portfolio"), and the Investment Advisor is willing to so render such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Advisor to act as investment advisor to the Company for the Portfolio for the period and on the terms set forth in this Agreement. The Investment Advisor accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. The Company's Common Stock, $.001 par value (the "Shares") has been classified into fourteen different classes of Common Stock: the "Class A Shares", the "Class B Shares", the "Class C Shares", the "Class D Shares", the "Class E Shares", the "Class F Shares", the "Class G Shares", the "Class H Shares", the "Class I Shares", the "Class J Shares", the "Class K Shares", the "Class L Shares", the "Class M Shares, and the "Class N Shares", respectively. The Portfolio contains four classes of Shares: the Class E Shares, the Class G Shares, the Class I Shares, and the Class L Shares.
2. Delivery of Documents. The Company has furnished the Investment Advisor with copies properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Company, filed with the Secretary of State of Maryland on February 29, 1988, as amended (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, herein called the "Articles of Incorporation");
(b) Articles Supplementary of the Company, filed with the Secretary of State of the State of Maryland on March 24, 1988 and all further Articles of Supplementary filed with the State of Maryland ("Articles Supplementary");
(c) By-Laws of the Company, as amended (such By-Laws, as presently in effect and as they shall from time to time be amended, herein called the "By-Laws");
(d) Resolutions of the Board of Directors of the Company authorizing the appointment of the Investment Advisor and the execution and delivery of this Agreement;
(e) A copy of each Distribution Agreement between the Company and Planco Financial Services, Inc. (the "Distributor") relating to any class of the Portfolio and the form of each related Dealer Agreement, if any, for broker-dealers participating in the distribution of any class of Shares representing interests in the Portfolio ("Participating Dealers");
(f) Each Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act relating to any class of Shares representing interests in the Portfolio;
(g) Each Shareholder Servicing Agreement, if any, relating to any class of Shares representing interests in the Portfolio;
(h) Each Non-12b-l Shareholder Services Plan, if any, relating to any class of Shares representing interests in the Portfolio;
(i) Notification of Registration of the Company under the 1940 Act on Form N-8A as filed with the Securities and Exchange Commission ("SEC") on March 24, 1988 and all amendments thereto;
(j) The most recent Registration Statement of the Company on Form N-lA under the Securities Act of 1933 (the "1933 Act") (File No. 33-20827) and under the 1940 Act filed with the SEC on March 24, 1988 relating to the Shares, and all amendments thereto (the "Registration Statement"); and
(k) Each Prospectus relating to any class of Shares representing interests in the Portfolio in effect under the 1933 Act (such prospectuses, as presently in effect and as they shall from time to time be amended and supplemented, are herein collectively called the "Prospectuses").
The Company will furnish the Investment Advisor from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Management of the Portfolio. Subject to the supervision of the Board of Directors of the Company, the Investment Advisor will provide for the overall management of the Portfolio, including (i) the provision of a continuous investment program for the Portfolio, including investment research and management with respect to all securities, investments, cash and cash equivalents in the Portfolio, (ii) the determination from time to time of what securities and other investments will be purchased, retained or sold by the Company for the Portfolio, (iii) the placement of orders for all purchases and sales made for the Portfolio, and (iv) coordination of contractual relationships and communications between the Company and its contractual service providers. The Investment Advisor will provide the services rendered by it hereunder in accordance with the investment objectives, restrictions and policies of the Portfolio as stated in the applicable Prospectus and the applicable statement of additional information contained in the Registration Statement. The Investment Advisor further agrees that it will maintain all books and records with respect to the securities transactions of the Portfolio, keep its respective books of account and will render to the Company's Board of Directors such periodic and special reports as the Board may request.
4. Sub-Advisory Agreement. The Investment Advisor will receive statistical and credit advice, as well as computer and research services from Provident National Bank (the "Sub-Advisor"), and the Sub-Advisor's fees for such services will be paid by the Investment Advisor from the fees it receives from the Company pursuant to Paragraph 11. Notwithstanding anything herein to the contrary, this Agreement shall not be effective until the Investment Advisor and the Sub-Advisor deliver to the Company a duly executed copy of a Sub-Advisory Agreement in substantially the form of Exhibit A hereto pursuant to which the Sub-Advisor will provide the Investment Advisor with certain investment advisory services on behalf of the Portfolio, as described in the preceding sentence. The Investment Advisor agrees to give the Company prompt written notice of any termination of or notice to terminate the Sub-Advisory Agreement by any person other than the Company.
5. Brokerage. The Investment Advisor may place orders either directly with the issuer or with any broker or dealer. In placing orders with brokers and dealers, the Investment Advisor will attempt to obtain the best net price and the most favorable execution of its orders. In placing orders with such broker or dealer, the Investment Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. Consistent with this obligation, when the execution and price offered by two or more brokers or dealers are comparable, the Investment Advisor may, in its discretion, purchase and sell the Portfolio's securities to and from brokers and dealers who provide the Company with research advice and other services. In no instance will the Portfolio's securities be purchased from or sold to the Distributor, the Investment Advisor or any affiliated person thereof, except to the extent permitted by SEC exemptive order or by applicable law.
6. Administration Services.
(a) The Investment Advisor will perform the following administration and accounting functions on a daily basis:
(1) Journalize the Portfolio's investment, capital share and income and expense activities;
(2) Verify investment buy/sell trade tickets and transmit trades to the Company's custodian for proper settlement;
(3) Maintain individual ledgers for investment securities;
(4) Maintain historical tax lots for each security;
(5) Reconcile cash and investment balances of the Portfolio with the custodian, and prepare the beginning cash balance available for investment purposes;
(6) Update the cash availability throughout the day as required;
(7) Post to and prepare the Portfolio's Statement of Assets and Liabilities and the Statement of Operations;
(8) Calculate various contractual expenses (e.g., custody fees);
(9) Monitor the expense accruals and notify management of the Company of any proposed adjustments;
(10) Control all disbursements from the Portfolio and authorize such disbursements upon Written Instructions;
(11) Calculate capital gains and losses;
(12) Determine the Portfolio's net income;
(13) Obtain security market quotes from services approved by management of the Company, or if such quotes are unavailable, then obtain such prices from management of the Company, and in either case calculate the market value of the Portfolio's investments;
(14) Compute the net asset value of the Portfolio; and
(15) Compute the Portfolio's yields, total return, expense ratios, Portfolio turnover rate, and, Portfolio average dollar-weighted maturity.
(b) In addition to the accounting services described in the foregoing Paragraph 6(a), the Investment Advisor will:
(1) Prepare monthly financial statements, which will include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses;
(2) Prepare quarterly broker security transactions summaries;
(3) Supply various normal and customary Portfolio and Company statistical data as requested on an ongoing basis;
(4) Prepare for execution and file the Portfolio's and Company's Federal and state tax returns;
(5) Prepare and file the Company's Semi-Annual Reports with the SEC on Form N-SAR and prepare and file the Company's Rule 24f-2 Notice with the SEC;
(6) Prepare and file with the SEC the Portfolio's and Company's annual, semi-annual, and quarterly Shareholder reports;
(7) Assist with the preparation of registration statements on Form N-1A and other filings relating to the registration of Shares;
(8) Monitor the Company's status as a regulated investment company under Sub-chapter M of the Internal Revenue Code of 1986, as amended;
(9) Qualify the Class E Shares, the Class G Shares, the Class I Shares, and the Class L Shares for sale in each state in which the Company's Board of Directors determines to sell the Class E Shares, the Class G Shares, the Class I Shares, or the Class L Shares and make all filings and take all appropriate actions necessary to maintain and renew such registrations of the Class E Shares, the Class G shares, the Class I Shares, and the Class L Shares;
(10) Monitor the Company's compliance with the amounts and conditions of each such state qualification; and
(11) Maintain the Company's fidelity bond as required by the 1940 Act and obtain a directors and officers liability policy.
(c) The Investment Advisor shall act as liaison with the Company's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit related schedules. The Investment Advisor shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as such may be required by the Company from time to time.
7. Conformity with Law; Confidentiality. The Investment Advisor further agrees that it will comply with all applicable Rules and Regulations of all Federal regulatory agencies having jurisdiction over the Investment Advisor in the performance of its duties hereunder (herein called the "Rules"). The Investment Advisor will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Investment Advisor 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 Company.
8. Services Not Exclusive. The investment management and administration services rendered by the Investment Advisor hereunder are not to be deemed exclusive, and the Investment Advisor shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby.
9. Books and Records. In compliance with the requirements of Rule 3la-3 of the Rules, the Investment Advisor hereby agrees that all records which it maintains for the Portfolio are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Investment Advisor further agrees to preserve for the periods prescribed by Rule 3la-2 the records required to be maintained by Rule 3la-1 of the Rules.
10. Expenses. During the term of this Agreement, the Investment Advisor will pay all expenses incurred by it in connection with its activities under this Agreement other than the cost of (including brokerage commissions, if any) securities purchased for the Portfolio, the cost of any independent pricing service used in valuing the Portfolio's securities and fees and expenses of registering and qualifying shares for distribution under state securities laws.
In addition, if the expenses borne by the Portfolio in any fiscal year exceed the most restrictive applicable expense limitations imposed by the securities regulations of any state in which the Shares are registered or qualified for sale to the public, the Investment Advisor shall reimburse the Portfolio for any excess up to the amount of the fees payable by the Portfolio to it during such fiscal year pursuant to Paragraph 11 hereof; Provided, however, that notwithstanding the foregoing, the Investment Advisor shall reimburse the Portfolio for such excess expenses regardless of the amount of such fees payable to it during such fiscal year to the extent that the securities regulations of any state in which the Shares are registered or qualified for sale so require.
Compensation.
(a) For the services provided and the expenses assumed pursuant to this Agreement with respect to the Portfolio, the Company will pay the Investment Advisor from the assets of the Portfolio and the Investment Advisor will accept as full compensation therefor a fee, computed daily and payable monthly, at the following annual rate: .45% of-the first $250 million of the Portfolio's average daily net assets, .40% of the next $250 million of the Portfolio's average daily net assets, and .35% of the Portfolio's average daily net assets in excess of $500 million.
(b) The fee attributable to the Portfolio shall be satisfied only against the assets of the Portfolio and not against the assets of any other investment portfolio of the Company.
12. Limitation of Liability of the Investment Advisor. The Investment Advisor 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 this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Advisor in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. Notwithstanding the foregoing, the Investment Advisor shall be liable to the Company for the acts and omissions of the Sub-Advisor to the extent that the Sub-Advisor is liable to the Investment Advisor for such acts or omissions under the Sub-Advisory Agreement between the Investment Advisor and the Sub-Advisor.
13. Duration and Termination. This Agreement shall become effective with respect to the Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of the Portfolio and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until August 16, 1990. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on August 16, provided such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Company who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio; provided, however, that this Agreement may be terminated with respect to the Portfolio by the Company at any time, without the payment of any penalty, by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' written notice to the Investment Advisor, or by the Investment Advisor at any time, without payment of any penalty, on 90 days' written notice to the Company. This Agreement will immediately terminate in the event of its assignment and will immediately terminate with respect to the Portfolio upon any termination of the Sub-Advisory Agreement. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the 1940 Act).
14. Delegation. On thirty (30) days prior written notice to the Fund, the Investment Advisor may delegate those of its duties set forth in Paragraph 6 hereof to any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC Financial Corp, provided that (i) the delegate agrees with the Investment Advisor to comply with all relevant provisions of the 1940 Act; and (ii) the Investment Advisor and such delegate shall promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation, including (without limitation) the capabilities of the delegate. Any delegation under this paragraph shall not be deemed an assignment for purposes of paragraph 13 hereof. Notwithstanding any such delegation, the Investment Advisor shall remain responsible for the performance of its duties set forth in Paragraph 6 hereof and shall hold the Fund harmless from the acts and omissions, under the standards of care provided for herein, of any delegate chosen pursuant to this Paragraph 14.
15. Amendment of this Agreement. No provision of this Agreement may be changed, discharged or terminated orally, except by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio.
16. Miscellaneous. 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. 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 upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
(Corporate Seal) The RBB Fund, INC.
Attest: /s/ Morgan R. Jones By: /s/ Jack Thomson
------------------- ----------------
President
(Corporate Seal)
PROVIDENT INSTITUTIONAL
Attest: /s/Eugene P. Gram MANAGEMENT CORPORATION
-----------------
By: /s/ Thomas H. Neim
------------------
President
|
Exhibit 5(b)
SUB-ADVISORY AGREEMENT
(Money Portfolio)
AGREEMENT dated as of August 16, 1988 between PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION (herein called the "Investment Advisor") and PROVIDENT NATIONAL BANK (herein called the "Sub-Advisor").
WHEREAS, the Investment Advisor is the investment advisor to The RBB Fund, Inc. (herein called the "Company"), an open-end, diversified, management investment company registered under the Investment Company Act of 1940, on behalf of the Company's Money Market Portfolio (herein called the "Portfolio"); and
WHEREAS, the Investment Advisor wishes to retain the Sub-Advisor to provide it with investment research, administrative, and statistical services in connection with Investment Advisor's advisory activities on behalf of the Portfolio; and
WHEREAS, the Sub-Advisor is willing to provide such services to the Investment Advisor upon the conditions and for the compensation set forth below,
NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows:
1. Appointment. The Investment Advisor hereby appoints the Sub-Advisor its sub-advisor with respect to the Portfolio as required by the Investment Advisory and Administration Agreement between the Investment Advisor and the Company dated as of August 16, 1988 (such Agreement or the most recent successor advisory agreement between such parties is herein called the "Advisory Agreement"). The Sub-Advisor accepts such appointment and agrees to render the services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Investment Advisor shall provide to the Sub-Advisor copies of the Company's most recent prospectus and statement of additional information (including supplements thereto) which relate to any class of shares representing interests in the Portfolio (each such prospectus and statement of additional information as presently in effect, and as they shall from time to time be amended and supplemented, is herein respectively called a "Prospectus" and a "Statement of Additional Information").
3. Sub-Advisory Services to the Portfolio. Subject to the supervision of the Board of Directors of the Company, the Sub-Advisor will provide the Company investment research and credit analysis concerning prospective and existing investments for the Portfolio, make recommendations with respect to the continuous investment program for the Portfolio, supply the Investment Advisor computer facilities and operating personnel, and provide certain statistical services as the Investment Advisor may from time to time reasonably request. The Sub-Advisor will provide the services rendered by it hereunder in accordance with the investment objectives, policies and restrictions as stated in the applicable Prospectus and Statement of Additional Information. The Sub-Advisor further agrees that it:
(a) will use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities;
(b) will keep or assist the Investment Advisor in keeping all books and records with respect to the securities transactions of the Portfolio and their respective books of account; and
(c) will render to the Company's Board of Directors such periodic and special reports as the Board may request.
4. Brokerage. In those instances in which the Sub-Advisor is responsible for the selection of portfolio securities, the Sub-Advisor may place orders pursuant to its investment determinations for the Company either directly with the issuer or with any broker or dealer. In placing orders with such broker or dealer, the Sub-Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. The Sub-Advisor will attempt to obtain the best net price and the most favorable execution of its orders. The Sub-Advisor will endeavor to secure the best available terms for the Company, with due regard to the quality of research and other services provided by the broker. Consistent with these obligations, when the execution and price offered by two or more brokers or dealers are comparable, the Sub-Advisor may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the Company with research advice and other services. In no instance will portfolio securities be purchased from or sold to the Company's principal distributor, the Investment Advisor, or any affiliate thereof, except to the extent permitted by SEC exemptive order or by applicable law.
5. Compliance with Laws; Confidentiality. The Sub-Advisor agrees that it will comply with all applicable Rules and Regulations of all Federal regulatory agencies having jurisdiction over the Sub-Advisor in the performance of its duties hereunder (herein called the "Rules"). The Sub- Advisor will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Sub-Advisor 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 Company.
6. Services Not Exclusive. The Sub-Advisor's services hereunder are not deemed to be exclusive, and the Sub-Advisor shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby.
7. Books and Records. In compliance with the requirements of Rule 3la-3 of the Rules, the Sub-Advisor hereby agrees that all records which it maintains for the Company are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Sub-Advisor further agrees to preserve, or cause the Investment Advisor to preserve, for the periods prescribed by Rule 3la-2, the records required to be maintained by Rule 31a-1 of the Rules.
8. Expenses. During the term of this Agreement, the Sub-Advisor will pay all expenses incurred by it in connection with its activities under this Agreement.
9. Compensation. For the services which the Sub-Advisor will render to the Investment Advisor under this Agreement, the Investment Advisor will pay to the Sub-Advisor a monthly fee equal to 75% of each month's advisory fee received by the Investment Advisor from the Company on behalf of the Portfolio, pursuant to the Advisory Agreement between the Investment Advisor and the Company. The Investment Advisor shall inform the Sub-Advisor prior to waiving any advisory fees. The sub-advisory fee shall be paid by the Investment Advisor to the Sub-Advisor at least quarterly.
10. Limitation on Liability. The Sub-Advisor will not be liable for any error of judgment or mistake of law or for any loss suffered by the Investment Advisor or by the Company in connection with the matters to which this Agreement relates, except it shall be liable to the Investment Advisor and the Company for a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations or duties under this Agreement.
11. Duration and Termination. This Agreement shall become effective with respect to the Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of the Portfolio and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until August 16, 1990. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on August 16, provided such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Company who are not parties to this Agreement or interested persons of the Company or any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio; provided however, that this Agreement may be terminated with respect to the Portfolio by the Company at any time, without the payment of any penalty, by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' written notice to the Investment Advisor, and will be terminated upon any termination of the Advisory Agreement between the Company and the Investment Advisor. This Agreement will also immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the Investment Company Act of 1940, as amended.)
12. Amendment of this Agreement. No provision of this Agreement may be changed, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio.
13. Miscellaneous. 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. 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 upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
Attest: PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
----------------
[Corporate Seal] By: Thomas H. Neim
____________________
________________ PROVIDENT NATIONAL BANK
[Corporate Seal]
By: John N. McLaughlin
___________________
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Exhibit 5(c)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
(Tax-Free Money Portfolio)
AGREEMENT made as of August 16, 1988 between THE RBB FUND, INC., a Maryland corporation (herein called the "Company") and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (herein called the "Investment Advisor").
WHEREAS, the Company is registered as an open-end, diversified, management investment company under the Investment Company Act of 1940 (the "1940 Act") and currently offers shares representing interests in seven separate investment portfolios; and
WHEREAS, the Company desires to retain the Investment Advisor to render investment advisory and administration services with respect to the Company's Tax-Free Money Market Portfolio (the "Portfolio"), and the Investment Advisor is willing to so render such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Advisor to act as investment advisor to the Company for the Portfolio for the period and on the terms set forth in this Agreement. The Investment Advisor accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. The Company's Common Stock, $.001 par value (the "Shares") has been classified into fourteen different classes of Common Stock: the "Class A Shares", the "Class B Shares", the "Class C Shares", the "Class D Shares", the "Class E Shares", the "Class F Shares", the "Class G Shares", the "Class H Shares", the "Class I Shares", the "Class J Shares", the "Class K Shares", the "Class L Shares", the "Class M Shares, and the Class N Shares", respectively. The Portfolio contains four classes of Shares: the Class F Shares, the Class H Shares, the Class J Shares, and the Class M Shares.
2. Delivery of Documents. The Company has furnished the Investment Advisor with copies properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Company, filed with the Secretary of State of Maryland on February 29, 1988, as amended (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, herein called the "Articles of Incorporation");
(b) Articles Supplementary of the Company, filed with the Secretary of State of the State of Maryland on March 24, 1988 and all further Articles of Supplementary filed with the State of Maryland ("Articles Supplementary");
(c) By-Laws of the Company, as amended (such By-Laws, as presently in effect and as they shall from time to time be amended, herein called the "By-Laws");
(d) Resolutions of the Board of Directors of the Company authorizing the appointment of the Investment Advisor and the execution and delivery of this Agreement;
(e) A copy of each Distribution Agreement between the Company and Planco Financial Services, Inc. (the "Distributor") relating to any class of the Portfolio and the form of each related Dealer Agreement, if any, for broker-dealers participating in the distribution of any class of Shares representing interests in the Portfolio ("Participating Dealers");
(f) Each Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act relating to any class of Shares representing interests in the Portfolio;
(g) Each Shareholder Servicing Agreement, if any, relating to any class of Shares representing interests in the Portfolio;
(h) Each Non-12b-1 Shareholder Services Plan, if any, relating to any class of Shares representing interests in the Portfolio;
(i) Notification of Registration of the Company under the 1940 Act on Form N-8A as filed with the Securities and Exchange Commission ("SEC") on March 24, 1988 and all amendments thereto;
(j) The most recent Registration Statement of the Company on Form N-1A under the Securities Act of 1933 (the "1933 Act") (File No. 33-20827) and under the 1940 Act filed with the SEC on March 24, 1988 relating to the Shares, and all amendments thereto (the "Registration Statement"); and
(k) Each Prospectus relating to any class of Shares representing interests in the Portfolio in effect under the 1933 Act (such prospectuses, as presently in effect and as they shall from time to time be amended and supplemented, are herein collectively called the "Prospectuses").
The Company will furnish the Investment Advisor from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Management of the Portfolio. Subject to the supervision of the Board of Directors of the Company, the Investment Advisor will provide for the overall management of the Portfolio, including (i) the provision of a continuous investment program for the Portfolio, including investment research and management with respect to all securities, investments, cash and cash equivalents in the Portfolio, (ii) the determination from time to time of what securities and other investments will be purchased, retained or sold by the Company for the Portfolio, (iii) the placement of orders for all purchases and sales made for the Portfolio, and (iv) coordination of contractual relationships and communications between the Company and its contractual service providers. The Investment Advisor will provide the services rendered by it hereunder in accordance with the investment objectives, restrictions and policies of the Portfolio as stated in the applicable Prospectus and the applicable statement of additional information contained in the Registration Statement. The Investment Advisor further agrees that it will maintain all books and records with respect to the securities transactions of the Portfolio, keep its respective books of account and will render to the Company's Board of Directors such periodic and special reports as the Board may request.
4. Sub-Advisory Agreement. The Investment Advisor will receive statistical and credit advice, as well as computer and research services from Provident National Bank (the "Sub-Advisor"), and the Sub-Advisor's fees for such services will be paid by the Investment Advisor from the fees it receives from the Company pursuant to Paragraph 11. Notwithstanding anything herein to the contrary, this Agreement shall not be effective until the Investment Advisor and the Sub-Advisor deliver to the Company a duly executed copy of a Sub-Advisory Agreement in substantially the form of Exhibit A hereto pursuant to which the Sub-Advisor will provide the Investment Advisor with certain investment advisory services on behalf of the Portfolio, as described in the preceding sentence. The Investment Advisor agrees to give the Company prompt written notice of any termination of or notice to terminate the Sub-Advisory Agreement by any person other than the Company.
5. Brokerage. The Investment Advisor may place orders either directly with the issuer or with any broker or dealer. In placing orders with brokers and dealers, the Investment Advisor will attempt to obtain the best net price and the most favorable execution of its orders. In placing orders with such broker or dealer, the Investment Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. Consistent with this obligation, when the execution and price offered by two or more brokers or dealers are comparable, the Investment Advisor may, in its discretion, purchase and sell the Portfolio's securities to and from brokers and dealers who provide the Company with research advice and other services. In no instance will the Portfolio's securities be purchased from or sold to the Distributor, the Investment Advisor or any affiliated person thereof, except to the extent permitted by SEC exemptive order or by applicable law.
6. Administration Services.
(a) The Investment Advisor will perform the following administration and accounting functions on a daily basis:
(1) Journalize the Portfolio's investment, capital share and income and expense activities;
(2) Verify investment buy/sell trade tickets and transmit trades to the Company's custodian for proper settlement;
(3) Maintain individual ledgers for investment securities;
(4) Maintain historical tax lots for each security;
(5) Reconcile cash and investment balances of the Portfolio with the custodian, and prepare the beginning cash balance available for investment purposes;
(6) Update the cash availability throughout the day as required;
(7) Post to and prepare the Portfolio's Statement of Assets and Liabilities and the Statement of Operations;
(8) Calculate various contractual expenses (e.g., custody fees);
(9) Monitor the expense accruals and notify management of the Company of any proposed adjustments;
(10) Control all disbursements from the Portfolio and authorize such disbursements upon Written Instructions;
(11) Calculate capital gains and losses;
(12) Determine the Portfolio's net income;
(13) Obtain security market quotes from services approved by management of the Company, or if such quotes are unavailable, then obtain such prices from management of the Company, and in either case calculate the market value of the Portfolio's investments;
(14) Compute the net asset value of the Portfolio; and
(15) Compute the Portfolio's yields, total return, expense ratios, Portfolio turnover rate, and, Portfolio average dollar-weighted maturity.
(b) In addition to the accounting services described in the foregoing Paragraph 6(a), the Investment Advisor will:
(1) Prepare monthly financial statements, which will include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses;
(2) Prepare quarterly broker security transactions summaries
(3) Supply various normal and customary Portfolio and Company statistical data as requested on an ongoing basis;
(4) Prepare for execution and file the Portfolio's and Company's Federal and state tax returns;
(5) Prepare and file the Company's Semi-Annual Reports with the SEC on Form N-SAR and prepare and file the Company's Rule 24f-2 Notice with the SEC;
(6) Prepare and file with the SEC the Portfolio's and Company's annual, semi-annual, and quarterly Shareholder reports;
(7) Assist with the preparation of registration statements on Form N-1A and other filings relating to the registration of Shares;
(8) Monitor the Company's status as a regulated investment company under Sub-chapter M of the Internal Revenue Code of 1986, as amended;
(9) Qualify the Class F Shares, the Class H Shares, the Class J Shares, and the Class M Shares for sale in each state in which the Company's Board of Directors determines to sell the Class F Shares, the Class H Shares, the Class J Shares, or the Class M Shares and make all filings and take all appropriate actions necessary to maintain and renew such registrations of the Class F Shares, the Class H Shares, the Class J Shares, and the Class M Shares;
(10) Monitor the Company's compliance with the amounts and conditions of each such state qualification; and
(11) Maintain the Company's fidelity bond as required by the 1940 Act and obtain a directors and officers liability policy.
(c) The Investment Advisor shall act as liaison with the Company's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit related schedules. The Investment Advisor shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as such may be required by the Company from time to time.
7. Conformity with Law; Confidentiality. The Investment Advisor further agrees that it will comply with all applicable Rules and Regulations of all Federal regulatory agencies having jurisdiction over the Investment Advisor in the performance of its duties hereunder (herein called the "Rules"). The Investment Advisor will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Investment Advisor 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 Company.
8. Services Not Exclusive. The investment management and administration services rendered by the Investment Advisor hereunder are not to be deemed exclusive, and the Investment Advisor shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby.
9. Books and Records. In compliance with the requirements of Rule 31a-3 of the Rules, the Investment Advisor hereby agrees that all records which it maintains for the Portfolio are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Investment Advisor further agrees to preserve for the periods prescribed by Rule 31a-2 the records required to be maintained by Rule 31a-1 of the Rules.
10. Expenses. During the term of this Agreement, the Investment Advisor will pay all expenses incurred by it in connection with its activities under this Agreement other than the cost of (including brokerage commissions, if any) securities purchased for the Portfolio, the cost of any independent pricing service used in valuing the Portfolio's securities and fees and expenses of registering and qualifying shares for distribution under state securities laws.
In addition, if the expenses borne by the Portfolio in any fiscal year exceed the most restrictive applicable expense limitations imposed by the securities regulations of any state in which the Shares are registered or qualified for sale to the public, the Investment Advisor shall reimburse the Portfolio for any excess up to the amount of the fees payable by the Portfolio to it during such fiscal year pursuant to Paragraph 11 hereof; provided, however, that notwithstanding the foregoing, the Investment Advisor shall reimburse the Portfolio for such excess expenses regardless of the amount of such fees payable to it during such fiscal year to the extent that the securities regulations of any state in which the Shares are registered or qualified for sale so require.
11. Compensation.
(a) For the services provided and the expenses assumed pursuant to this Agreement with respect to the Portfolio, the Company will pay the Investment Advisor from the assets of the Portfolio and the Investment Advisor will accept as full compensation therefor a fee, computed daily and payable monthly, at the following annual rate: .45% of the first $250 million of the Portfolio's average daily net assets, .40% of the next $250 million of the Portfolio's average daily net assets, and .35% of the Portfolio's average daily net assets in excess of $500 million.
(b) The fee attributable to the Portfolio shall be satisfied only against the assets of the Portfolio and not against the assets of any other investment portfolio of the Company.
12. Limitation of Liability of the Investment Advisor. The Investment Advisor 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 this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Advisor in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. Notwithstanding the foregoing, the Investment Advisor shall be liable to the Company for the acts and omissions of the Sub-Advisor to the extent that the Sub-Advisor is liable to the Investment Advisor for such acts or omissions under the Sub-Advisory Agreement between the Investment Advisor and the Sub-Advisor.
13.Duration and Termination. This Agreement shall become effective with respect to the Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of the Portfolio and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until August 16, 1990. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on August 16, provided such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Company who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio; provided, however, that this Agreement may be terminated with respect to the Portfolio by the Company at any time, without the payment of any penalty, by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' written notice to the Investment Advisor, or by the Investment Advisor at any time, without payment of any penalty, on 90 days' written notice to the Company. This Agreement will immediately terminate in the event of its assignment and will immediately terminate with respect to the Portfolio upon any termination of the Sub-Advisory Agreement. (As used in this Agreement, the terms "majority of theoutstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the 1940 Act.)
14. Delegation. On thirty (30) days prior written notice to the Fund, the Investment Advisor may delegate those of its duties set forth in Paragraph 6 hereof to any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC Financial Corp, provided that (i) the delegate agrees with the Investment Advisor to comply with all relevant provisions of the 1940 Act; and (ii) the Investment Advisor and such delegate shall promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation, including (without limitation) the capabilities of the delegate. Any delegation under this paragraph shall not be deemed an assignment for purposes of paragraph 13 hereof. Notwithstanding any such delegation, the Investment Advisor shall remain responsible for the performance of its duties set forth in Paragraph 6 hereof and shall hold the Fund harmless from the acts and omissions, under the standards of care provided for herein, of any delegate chosen pursuant to this Paragraph 14.
15. Amendment of this Agreement. No provision of this Agreement may be changed, discharged or terminated orally, except by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio.
16. Miscellaneous. 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. 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 upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
(Corporate Seal) The RBB FUND, INC.
Attest: /S/ MORGAN R. JONES By: /S/illegible
___________________ _____________
MORGAN R. JONES
PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
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Attest: /S/illegible By: /S/THOMAS H. NEVIN
____________ __________________
THOMAS H. NEVIN
President
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Exhibit 5(d)
SUB-ADVISORY AGREEMENT
(Tax-Free Money Portfolio)
AGREEMENT dated as of August 16, 1988 between PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION (herein called the "Investment Advisor") and PROVIDENT NATIONAL BANK (herein called the "Sub-Advisor").
WHEREAS, the Investment Advisor is the investment advisor to The RBB Fund, Inc. (herein called the "Company"), an open-end, diversified, management investment company registered under the Investment Company Act of 1940, on behalf of the Company's Tax-Free Money Market Portfolio (herein called the "Portfolio"); and
WHEREAS, the Investment Advisor wishes to retain the Sub-Advisor to provide it with investment research, administrative, and statistical services in connection with Investment Advisor's advisory activities on behalf of the Portfolio; and
WHEREAS, the Sub-Advisor is willing to provide such services to the Investment Advisor upon the conditions and for the compensation set forth below,
NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows:
1. Appointment. The Investment Advisor hereby appoints the Sub-Advisor its sub-advisor with respect to the Portfolio as required by the Investment Advisory and Administration Agreement between the Investment Advisor and the Company dated as of August 16, 1988 (such Agreement or the most recent successor advisory agreement between such parties is herein called the "Advisory Agreement"). The Sub-Advisor accepts such appointment and agrees to render the services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Investment Advisor shall provide to the Sub-Advisor copies of the Company's most recent prospectus and statement of additional information (including supplements thereto) which relate to any class of shares representing interests in the Portfolio (each such prospectus and statement of additional information as presently in effect, and as they shall from time to time be amended and supplemented, is herein respectively called a "Prospectus" and a "Statement of Additional Information").
3. Sub-Advisory Services to the Portfolio. Subject to the supervision of the Board of Directors of the Company, the Sub-Advisor will provide the Company investment research and credit analysis concerning prospective and existing investments for the Portfolio, make recommendations with respect to the continuous investment program for the Portfolio, supply the Investment Advisor computer facilities and operating personnel, and provide certain statistical services as the Investment Advisor may from time to time reasonably request. The Sub-Advisor will provide the services rendered by it hereunder in accordance with the investment objectives, policies and restrictions as stated in the applicable Prospectus and Statement of Additional Information. The Sub-Advisor further agrees that it:
(a) will use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities;
(b) will keep or assist the Investment Advisor in keeping all books and records with respect to the securities transactions of the Portfolio and their respective books of account; and
(c) will render to the Company's Board of Directors such periodic and special reports as the Board may request.
4. Brokerage. In those instances in which the Sub-Advisor is responsible for the selection of portfolio securities, the Sub-Advisor may place orders pursuant to its investment determinations for the Company either directly with the issuer or with any broker or dealer. In placing orders with such broker or dealer, the Sub-Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. The Sub-Advisor will attempt to obtain the best net price and the most favorable execution of its orders. The Sub-Advisor will endeavor to secure the best available terms for the Company, with due regard to the quality of research and other services provided by the broker. Consistent with these obligations, when the execution and price offered by two or more brokers or dealers are comparable, the Sub-Advisor may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the Company with research advice and other services. In no instance will portfolio securities be purchased from or sold to the Company's principal distributor, the Investment Advisor, or any affiliate thereof, except to the extent permitted by SEC exemptive order or by applicable law.
5. Compliance with Laws; Confidentiality. The Sub-Advisor agrees that it will comply with all applicable Rules and Regulations of all Federal regulatory agencies having jurisdiction over the Sub-Advisor in the performance of its duties hereunder (herein called the "Rules"). The Sub- Advisor will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Sub-Advisor 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 Company.
6. Services Not Exclusive. The Sub-Advisor's services hereunder are not deemed to be exclusive, and the Sub-Advisor shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby.
7. Books and Records. In compliance with the requirements of Rule 3la-3 of the Rules, the Sub-Advisor hereby agrees that all records which it maintains for the Company are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Sub-Advisor further agrees to preserve, or cause the Investment Advisor to preserve, for the periods prescribed by Rule 3la-2, the records required to be maintained by Rule 31a-l of the Rules.
8. Expenses. During the term of this Agreement, the Sub-Advisor will pay all expenses incurred by it in connection with its activities under this Agreement.
9. Compensation. For the services which the Sub-Advisor will render to the Investment Advisor under this Agreement, the Investment Advisor will pay to the Sub-Advisor a monthly fee equal to 75% of each month's advisory fee received by the Investment Advisor from the Company on behalf of the Portfolio, pursuant to the Advisory Agreement between the Investment Advisor and the Company. The Investment Advisor shall inform the Sub-Advisor prior to waiving any advisory fees. The sub-advisory fee shall be paid by the Investment Advisor to the Sub-Advisor at least quarterly.
10. Limitation on Liability. The Sub-Advisor will not be liable for any error of judgment or mistake of law or for any loss suffered by the Investment Advisor or by the Company in connection with the matters to which this Agreement relates, except it shall be liable to the Investment Advisor and the Company for a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations or duties under this Agreement.
11. Duration and Termination. This Agreement shall become effective with respect to the Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of the Portfolio and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until August 16, 1990. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on August 16, provided such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Company who are not parties to this Agreement or interested persons of the Company or any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio; provided however, that this Agreement may be terminated with respect to the Portfolio by the Company at any time, without the payment of any penalty, by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' written notice to the Investment Advisor, and will be terminated upon any termination of the Advisory Agreement between the Company and the Investment Advisor. This Agreement will also immediately terminate in the event of its assignment. (As used in this Agreement, the terms " majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the Investment Company Act of 1940, as amended.)
12. Amendment of this Agreement. No provision of this Agreement may be changed, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio.
13. Miscellaneous. 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. 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 upon and shall inure to
the benefit of the parties hereto and their respective successor and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
Attest:
/s/ John D. Silcox, Jr. PROVIDENT INSTITUTIONAL
---------------------- MANAGEMENT CORPORATION
(Corporate Seal) By: /s/ Thomas H. Neim
------------------
/s/ John D. Silcox, Jr. PROVIDENT NATIONAL BANK
-----------------------
(Corporate Seal) By: /s/ John W. McLaughlin
----------------------
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Exhibit 5(e)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
(Government Obligations Money Portfolio)
AGREEMENT made as of August 16, 1988 between THE RBB FUND, INC., a Maryland corporation (herein called the "Company"), and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (herein called the "Investment Advisor").
WHEREAS, the Company is registered as an open-end, diversified, management investment company under the Investment Company Act of 1940 (the "1940 Act") and currently offers shares representing interests in seven separate investment portfolios; and
WHEREAS, the Company desires to retain the Investment Advisor to render investment advisory and administration services with respect to the Company's Government Obligations Money Market Portfolio (the "Portfolio"), and the Investment Advisor is willing to so render such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Advisor to act as investment advisor to the Company for the Portfolio for the period and on the terms set forth in this Agreement. The Investment Advisor accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. The Company's Common Stock, $.001 par value (the "Shares") has been classified into fourteen different classes of Common Stock: the "Class A Shares", the "Class B Shares", the "Class C Shares", the "Class D Shares", the "Class E Shares", the "Class F Shares", the "Class G Shares", the "Class H Shares", the "Class I Shares", the "Class J Shares", the "Class K Shares", the "Class L Shares", the "Class M Shares, and the "Class N Shares", respectively. The Portfolio contains two classes of Shares: the Class K Shares and the Class N Shares.
2. Delivery of Documents. The Company has furnished the Investment Advisor with copies properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Company, filed with the Secretary of State of Maryland on February 29, 1988, as amended (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, herein called the "Articles of Incorporation");
(b) Articles Supplementary of the Company, filed with the Secretary of State of the State of Maryland on March 24, 1988 and all further Articles of Supplementary filed with the State of Maryland ("Articles Supplementary");
(c) By-Laws of the Company, as amended (such By-Laws, as presently in effect and as they shall from time to time be amended, herein called the "By-Laws");
(d) Resolutions of the Board of Directors of the Company authorizing the appointment of the Investment Advisor and the execution and delivery of this Agreement;
(e) A copy of each Distribution Agreement between the Company and Planco Financial Services, Inc. (the "Distributor") relating to any class of the Portfolio and the form of each related Dealer Agreement, if any, for broker-dealers participating in the distribution of any class of Shares representing interests in the Portfolio ("Participating Dealers");
(f) Each Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act relating to any class of Shares representing interests in the Portfolio;
(g) Each Shareholder Servicing Agreement, if any relating to any class of Shares representing interests in the Portfolio;
(h) Each Non-12b-1 Shareholder Services Plan, if any, relating to any class of Shares representing interests in the Portfolio;
(i) Notification of Registration of the Company under the 1940 Act on Form N-8A as filed with the Securities and Exchange Commission ("SEC") on March 24, 1988 and all amendments thereto;
(j) The most recent Registration Statement of the Company on Form N-1A under the Securities Act of 1933 (the "1933 Act") (File No. 33-20827) and under the 1940 Act filed with the SEC on March 24, 1988 relating to the Shares, and all amendments thereto (the "Registration Statement"); and
(k) Each Prospectus relating to any class of Shares representing interests in the Portfolio in effect under the 1933 Act (such prospectuses, as presently in effect and as they shall from time to time be amended and supplemented, are herein collectively called the "Prospectuses").
The Company will furnish the Investment Advisor from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Management of the Portfolio. Subject to the supervision of the Board of Directors of the Company, the Investment Advisor will provide for the overall management of the Portfolio, including (i) the provision of a continuous investment program for the Portfolio, including investment research and management with respect to all securities, investments, cash and cash equivalents in the Portfolio, (ii) the determination from time to time of what securities and other investments will be purchased, retained or sold by the Company for the Portfolio, (iii) the placement of orders for all purchases and sales made for the Portfolio, and (iv) coordination of contractual relationships and communications between the Company and its contractual service providers. The Investment Advisor will provide the services rendered by it hereunder in accordance with the investment objectives, restrictions and policies of the Portfolio as stated in the applicable Prospectus and the applicable statement of additional information contained in the Registration Statement. The Investment Advisor further agrees that it will maintain all books and records with respect to the securities transactions of the Portfolio, keep its respective books of account and will render to the Company's Board of Directors such periodic and special reports as the Board may request.
4. Sub-Advisory Agreement. The Investment Advisor will receive statistical and credit advice, as well as computer and research services from Provident National Bank (the "Sub-Advisor"), and the Sub-Advisor's fees for such services will be paid by the Investment Advisor from the fees it receives from the Company pursuant to Paragraph 11. Notwithstanding anything herein to the contrary, this Agreement shall not be effective until the Investment Advisor and the Sub-Advisor deliver to the Company a duly executed copy of a Sub-Advisory Agreement in substantially the form of Exhibit A hereto pursuant to which the Sub-Advisor will provide the Investment Advisor with certain investment advisory services on behalf of the Portfolio, as described in the preceding sentence. The Investment Advisor agrees to give the Company prompt written notice of any termination of or notice to terminate the Sub-Advisory Agreement by any person other than the Company.
5. Brokerage. The Investment Advisor may place orders either directly with the issuer or with any broker or dealer. In placing orders with brokers and dealers, the Investment Advisor will attempt to obtain the best net price and the most favorable execution of its orders. In placing orders with such broker or dealer, the Investment Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. Consistent with this obligation, when the execution and price offered by two or more brokers or dealers are comparable, the Investment Advisor may, in its discretion, purchase and sell the Portfolio's securities to and from brokers and dealers who provide the Company with research advice and other services. In no instance will the Portfolio's securities be purchased from or sold to the Distributor, the Investment Advisor or any affiliated person thereof, except to the extent permitted by SEC exemptive order or by applicable law.
6. Administration Services.
(a) The Investment Advisor will perform the following administration and accounting functions on a daily basis:
(1) Journalize the Portfolio's investment, capital share and income and expense activities;
(2) Verify investment buy/sell trade tickets and transmit trades to the Company's custodian for proper settlement;
(3) Maintain individual ledgers for investment securities;
(4) Maintain historical tax lots for each security;
(5) Reconcile cash and investment balances of the Portfolio with the custodian, and prepare the beginning cash balance\ available for investment purposes;
(6) Update the cash availability throughout the day as required;
(7) Post to and prepare the Portfolio's Statement of Assets and Liabilities and the Statement of Operations;
(8) Calculate various contractual expenses (e.g., custody fees);
(9) Monitor the expense accruals and notify management of the Company of any proposed adjustments;
(10) Control all disbursements from the Portfolio and authorize such disbursements upon Written Instructions;
(11) Calculate capital gains and losses;
(12) Determine the Portfolio's net income;
(13) Obtain security market quotes from services approved by management of the Company, or if such quotes are unavailable, then obtain such prices from management of the Company, and in either case calculate the market value of the Portfolio's investments;
(14) Compute the net asset value of the Portfolio; and
(15) Compute the Portfolio's yields, total return, expense ratios, Portfolio turnover rate, and, Portfolio average dollar-weighted maturity.
(b) In addition to the accounting services described in the foregoing Paragraph 6(a), the Investment Advisor will:
(1) Prepare monthly financial statements, which will include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses;
(2) Prepare quarterly broker security transactions summaries;
(3) Supply various normal and customary Portfolio and Company statistical data as requested on an ongoing basis;
(4) Prepare for execution and file the Portfolio's and Company's Federal and state tax returns;
(5) Prepare and file the Company's Semi-Annual Reports with the SEC on Form N-SAR and prepare and file the Company's Rule 24f-2 Notice with the SEC;
(6) Prepare and file with the SEC the Portfolio's and Company's annual, semi-annual, and quarterly Shareholder reports;
(7) Assist with the preparation of registration statements on Form N-lA and other filings relating to the registration of Shares;
(8) Monitor the Company's status as a regulated investment company under Sub-chapter M of the Internal Revenue Code of 1986, as amended;
(9) Qualify the Class K Shares and the Class N Shares for sale in each state in which the Company's Board of Directors determines to sell the Class K Shares or the Class N Shares and make all filings and take all appropriate actions necessary to maintain and renew such registrations of the Class K Shares and the Class N Shares;
(10) Monitor the Company's compliance with the amounts and conditions of each such state qualification; and
(11) Maintain the Company's fidelity bond as required by the 1940 Act and obtain a directors and officers liability policy.
(c) The Investment Advisor shall act as liaison with the Company's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit related schedules. The Investment Advisor shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as such may be required by the Company from time to time.
7. Conformity with Law; Confidentiality. The Investment Advisor further agrees that it will comply with all applicable Rules and Regulations of all Federal regulatory agencies having jurisdiction over the Investment Advisor in the performance of its duties hereunder (herein called the "Rules"). The Investment Advisor will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Investment Advisor 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 Company.
8. Services Not Exclusive. The investment management and administration services rendered by the Investment Advisor hereunder are not to be deemed exclusive, and the Investment Advisor shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby.
9. Books and Records. In compliance with the requirements of Rule 3la-3 of the Rules, the Investment Advisor hereby agrees that all records which it maintains for the Portfolio are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Investment Advisor further agrees to preserve for the periods prescribed by Rule 3la-2 the records required to be maintained by Rule 3la-l of the Rules.
10. Expenses. During the term of this Agreement, Investment Advisor will pay all expenses incurred by it in connection with its activities under this Agreement other than the cost of (including brokerage commissions, if any) securities purchased for the Portfolio, the cost of any independent pricing service used in valuing the Portfolio's securities and fees and expenses of registering and qualifying shares for distribution under state securities laws.
In addition, if the expenses borne by the Portfolio in any fiscal year exceed the most restrictive applicable expense limitations imposed by the securities regulations of any state in which the Shares are registered or qualified for sale to the public, the Investment Advisor shall reimburse the Portfolio for any excess up to the amount of the fees payable by the Portfolio to it during such fiscal year pursuant to Paragraph 11 hereof; provided, however, that notwithstanding the foregoing, the Investment Advisor shall reimburse the Portfolio for such excess expenses regardless of the amount of such fees payable to it during such fiscal year to the extent that the securities regulations of any state in which the Shares are registered or qualified for sale so require.
11. Compensation.
(a) For the services provided and the expenses assumed pursuant to this Agreement with respect to the Portfolio, the Company will pay the Investment Advisor from the assets of the Portfolio and the Investment Advisor will accept as full compensation therefore a fee, computed daily and payable monthly, at the following annual rate: .45% of the first $250 million of the Portfolio's average daily net assets, .40% of the next $250 million of the Portfolio's average daily net assets, and .35% of the Portfolio's average daily net assets in excess of $500 million.
(b) The fee attributable to the Portfolio shall be satisfied only against the assets of the Portfolio and not against the assets of any other investment portfolio of the Company.
12. Limitation of Liability of the Investment Advisor. The Investment Advisor 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 this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Advisor in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. Notwithstanding the foregoing, the Investment Advisor shall be liable to the Company for the acts and omissions of the Sub-Advisor to the extent that the Sub-Advisor is liable to the Investment Advisor for such acts or omissions under the Sub-Advisory Agreement between the Investment Advisor and the Sub-Advisor.
13. Duration and Termination. This Agreement shall become effective with respect to the Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of the Portfolio and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until August 16, 1990. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on August 16, provided such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Company who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Company or by vote-of a majority of the outstanding voting securities of the Portfolio; provided, however, that this Agreement may be terminated with respect to the Portfolio by the Company at any time, without the payment of any penalty, by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' written notice to the Investment Advisor, or by the Investment Advisor at any time, without payment of any penalty, on 90 days' written notice to the Company. This Agreement will immediately terminate in the event of assignment and will immediately terminate with respect to the Portfolio upon any termination of the Sub-Advisory Agreement. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the 1940 Act.)
14. Delegation. On thirty (30) days prior written notice to the Fund, the Investment Advisor may delegate those of its duties set forth in Paragraph 6 hereof to any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC Financial Corp, provided that (i) the delegate agrees with the Investment Advisor to comply with all relevant provisions of the 1940 Act; and (ii) the Investment Advisor and such delegate shall promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation, including (without limitation) the capabilities of the delegate. Any delegation under this paragraph shall not be deemed an assignment for purposes of paragraph 13 hereof. Notwithstanding any such delegation, the Investment Advisor shall remain responsible for the performance of its duties set forth in Paragraph 6 hereof and shall hold the Fund harmless from the acts and omissions, under the standards of care provided for herein, of any delegate chosen pursuant to this Paragraph 14.
15. Amendment of this Agreement. No provision of this Agreement may be changed, discharged or terminated orally, except by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio.
16. Miscellaneous. 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. 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 upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and year first above written.
(Corporate Seal) THE RBB FUND, INC.
Attest: /s/Morgan R. Jones By: /s/ Joe McKee Thomson
------------------ ---------------------
(Corporate Seal) President
Attest: /s/Eugene P. Grow PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
By: /s/Thomas H. Neim
-----------------
President
|
Exhibit 5(f)
SUB-ADVISORY AGREEMENT
(Government Obligations Money Portfolio)
AGREEMENT dated as of August 16, 1988 between PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION (herein called the "Investment Advisor") and PROVIDENT NATIONAL BANK (herein called the "Sub-Advisor").
WHEREAS, the Investment Advisor is the investment advisor to The RBB Fund, Inc. (herein called the "Company"), an open-end, diversified, management investment company registered under the Investment Company Act of 1940, on behalf of the Company's Government Obligations Money Market Portfolio (herein called the "Portfolio"); and
WHEREAS, the Investment Advisor wishes to retain the Sub-Advisor to provide it with investment research, administrative, and statistical services in connection with Investment Advisor's advisory activities on behalf of the Portfolio; and
WHEREAS, the Sub-Advisor is willing to provide such services to the Investment Advisor upon the conditions and for the compensation set forth below,
NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Investment Advisor hereby appoints the Sub-Advisor its sub-advisor with respect to the Portfolio as required by the Investment Advisory and Administration Agreement between the Investment Advisor and the Company dated as of August 16, 1988 (such Agreement or the most recent successor advisory agreement between such parties is herein called the "Advisory Agreement"). The Sub-Advisor accepts such appointment and agrees to render the services herein set forth for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Investment Advisor shall provide to the Sub-Advisor copies of the Company's most recent prospectus and statement of additional information (including supplements thereto) which relate to any class of shares representing interests in the Portfolio (each such prospectus and statement of additional information as presently in effect, and as they shall from time to time be amended and supplemented, is herein respectively called a "Prospectus" and a "Statement of Additional Information").
3. SUB-ADVISORY SERVICES TO THE PORTFOLIO. Subject to the supervision of the Board of Directors of the Company, the Sub-Advisor will provide the Company investment research and credit analysis concerning prospective and existing investments for the Portfolio, make recommendations with respect to the continuous investment program for the Portfolio, supply the Investment Advisor computer facilities and operating personnel, and provide certain statistical services as the Investment Advisor may from time to time reasonably request. The Sub-Advisor will provide the services rendered by it hereunder in accordance with the investment objectives, policies and restrictions as stated in the applicable Prospectus and Statement of Additional Information. The Sub-Advisor further agrees that it:
(a) will use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities;
(b) will keep or assist the Investment Advisor in keeping all books and records with respect to the securities transactions of the Portfolio and their respective books of account; and
(c) will render to the Company's Board of Directors such periodic and special reports as the Board may request.
4. BROKERAGE. In those instances in which the Sub-Advisor is responsible for the selection of portfolio securities, the Sub-Advisor may place orders pursuant to its investment determinations for the Company either directly with the issuer or with any broker or dealer. In placing orders with such broker or dealer, the Sub-Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. The Sub-Advisor will attempt to obtain the best net price and the most favorable execution of its orders. The Sub-Advisor will endeavor to secure the best available terms for the Company, with due regard to the quality of research and other services provided by the broker. Consistent with these obligations, when the execution and price offered by two or more brokers or dealers are comparable, the Sub-Advisor may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the Company with research advice and other services. In no instance will portfolio securities be purchased from or sold to the Company's principal distributor, the Investment Advisor, or any affiliate thereof, except to the extent permitted by SEC exemptive order or by applicable law.
5. COMPLIANCE WITH LAWS; CONFIDENTIALITY. The Sub-Advisor agrees that it will comply with all applicable Rules and Regulations of all Federal regulatory agencies having jurisdiction over the Sub-Advisor in the performance of its duties hereunder (herein called the "Rules"). The Sub- Advisor will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Sub-Advisor 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 Company.
6. SERVICES NOT EXCLUSIVE. The Sub-Advisor's services hereunder are not deemed to be exclusive, and the Sub-Advisor shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby.
7. BOOKS AND RECORDS. In compliance with the requirements of Rule 3la-3 of the Rules, the Sub-Advisor hereby agrees that all records which it maintains for the Company are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Sub-Advisor further agrees to preserve, or cause the Investment Advisor to preserve, for the periods prescribed by Rule 3la-2, the records required to be maintained by Rule 31a-1 of the Rules.
8. EXPENSES. During the term of this Agreement, the Sub-Advisor will pay all expenses incurred by it in connection with its activities under this Agreement.
9. COMPENSATION. For the services which the Sub-Advisor will render to the Investment Advisor under this Agreement, the Investment Advisor will pay to the Sub-Advisor a monthly fee equal to 75% of each month's advisory fee received by the Investment Advisor from the Company on behalf of the Portfolio, pursuant to the Advisory Agreement between the Investment Advisor and the Company. The Investment Advisor shall inform the Sub-Advisor prior to waiving any advisory fees. The sub-advisory fee shall be paid by the Investment Advisor to the Sub-Advisor at least quarterly.
10. LIMITATION ON LIABILITY. The Sub-Advisor will not be liable for any error of judgment or mistake of law or for any loss suffered by the Investment Advisor or by the Company in connection with the matters to which this Agreement relates, except it shall be liable to the Investment Advisor and the Company for a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations or duties under this Agreement.
11. DURATION AND TERMINATION. This Agreement shall become effective with respect to the Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of the Portfolio and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until August 16, 1990. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on August 16, provided such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Company who are not parties to this Agreement or interested persons of the Company or any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio; PROVIDED HOWEVER, that this Agreement may be terminated with respect to the Portfolio by the Company at any time, without the payment of any penalty, by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' written notice to the Investment Advisor, and will be terminated upon any termination of the Advisory Agreement between the Company and the Investment Advisor. This Agreement will also immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the Investment Company Act of 1940, as amended.)
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio.
13. MISCELLANEOUS. 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. 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 upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
Attest:
/s/ John D. Silcox, Jr. PROVIDENT INSTITUTIONAL ----------------------- MANAGEMENT CORPORATION (Corporate Seal) By: Thomas H. Neim /s/ John D. Silcox, Jr. PROVIDENT NATIONAL BANK ------------------------ By: John W. McLaughlin (Corporate Seal) |
Exhibit 5(g)
INVESTMENT ADVISORY AGREEMENT
(Government Securities Portfolio)
AGREEMENT made as of April 8, 1991 between THE RBB FUND, INC., a Maryland corporation (herein called the "Company") and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (herein called the "Investment Advisor").
WHEREAS, the Company is registered as an open-end, management investment company under the Investment Company Act of 1940 (the "1940 Act") and currently offers or proposes to offer shares representing interests in ten separate investment portfolios; and
WHEREAS, the Company desires to retain the Investment Advisor to render investment advisory services with respect to the Company's Government Securities Portfolio (the "Portfolio"), and the Investment Advisor is willing to so render such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Advisor to act as investment advisor to the Company for the Portfolio for the period and on the terms set forth in this Agreement. The Investment Advisor accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. The Company's Common Stock, $.001 par value (the "Shares") has been classified into seventeen different classes of Common Stock: the "Class A Shares", the "Class B Shares", the "Class C Shares", the "Class D Shares", the "Class E Shares", the "Class F Shares", the "Class G Shares", the "Class H Shares", the "Class I Shares", the "Class J Shares", the "Class K Shares", the "Class L Shares", the "Class M Shares", the "Class N Shares", the "Class O, Shares", the "Class P Shares", and the "Class Q Shares", respectively. The Portfolio currently contains one class of Shares: the Class P Shares.
2. Delivery of Documents. The Company has furnished the Investment Advisor with copies properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Company, filed with the Secretary of State of Maryland on February 29, 1988, as amended (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, herein called the "Articles of Incorporation");
(b) Articles Supplementary of the Company, filed with the Secretary of State of the State of Maryland on March 24, 1988, April 27, 1990 and on May 1, 1990 and all further Articles of Supplementary filed with the State of Maryland ("Articles Supplementary");
(c) By-Laws of the Company, as amended (such By-Laws, as presently in effect and as they shall from time to time be amended, herein called the "By-Laws");
(d) Resolutions of the Board of Directors of the company authorizing the appointment of the Investment Advisor and the execution and delivery of this Agreement;
(e) A copy of each Distribution Agreement between the Company and the Company's principal underwriter (the "Distributor") relating to any class of the Portfolio and the form of each related Dealer Agreement, if any, for broker-dealers participating in the distribution of any class of Shares representing interests in the Portfolio ("Participating Dealers");
(f) Each Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act relating to any class of Shares representing interests in the Portfolio;
(g) Notification of Registration of the Company under the 1940 Act on Form N-8A as filed with the Securities and Exchange Commission ("SEC") on March 24, 1988 and all amendments thereto;
(h) The most recent Registration Statement of the Company on Form N-1A under the Securities Act of 1933 (the "1933 Act") (File No. 33-20827) and under the 1940 Act filed with the SEC relating to the Shares, and all amendments thereto (the "Registration Statement"); and
(i) Each Prospectus relating to any class of Shares representing interests in the Portfolio in effect under the 1933 Act (such prospectuses, as presently in effect and as they shall from time to time be amended and supplemented, are herein collectively called the "Prospectuses").
The Company will furnish the Investment Advisor from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Management of the Portfolio. Subject to the supervision of the Board of Directors of the Company, the Investment Advisor will provide for the overall management of the Portfolio, including (i) the provision of a continuous investment program for the Portfolio, including investment research and management with respect to all securities, investments, cash and cash equivalents in the Portfolio, (ii) the determination from time to time of what securities and other investments will be purchased, retained or sold by the Company for the Portfolio, and (iii) the placement of orders for all purchases and sales made for the Portfolio. The Investment Advisor will provide the services rendered by it hereunder in accordance with the investment objectives, restrictions and policies of the Portfolio as stated in the applicable Prospectus and the applicable statement of additional information contained in the Registration statement. The Investment Advisor further agrees that it will render to the Company's Board of Directors such periodic and special reports regarding the performance of its duties under this Agreement as the Board may request.
4. Brokerage. The Investment Advisor may place orders either directly with the issuer or with any broker or dealer. In placing orders with brokers and dealers, the Investment Advisor will attempt to obtain the best price and the most favorable execution of its orders. In placing orders, the Investment Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. Consistent with this obligation, the Investment Advisor may, 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 Portfolio and other clients of the Investment Advisor. Information and research received from such brokers will be in addition to, and not in lieu of, the services required to be performed by the Investment Advisor hereunder. 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 the Investment Advisor determines in good faith that such commission is reasonable in terms either of the transaction or the overall responsibility of the Investment Advisor to the Portfolio and its other clients and that the total commissions paid by the Portfolio will be reasonable in relation to the benefits to the Portfolio over the long-term. In no instance will the Portfolio's securities be purchased from or sold to the Company's principal underwriter, the Investment Advisor or any affiliated person thereof, except to the extent permitted by SEC exemptive order or by applicable law.
5. Conformity with Law; Confidentiality. The Investment Advisor further agrees that it will comply with all applicable Rules and Regulations of all Federal regulatory agencies having jurisdiction over the Investment Advisor in the performance of its duties hereunder (herein called the "Rules"). The Investment Advisor will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Investment Advisor 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 Company.
6. Services Not Exclusive. The investment management services rendered by the Investment Advisor hereunder are not to be deemed exclusive, and the Investment Advisor shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby.
7. Books and Records. In compliance with the requirements of Rule 31a-3 of the Rules, the Investment Advisor hereby agrees that all records which it maintains for the Portfolio are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Investment Advisor further agrees to preserve for the periods prescribed by Rule 31a-2 the records required to be maintained by Rule 31a-1 of the Rules.
8. Expenses. During the term of this Agreement, the Investment Advisor will pay all expenses incurred by it in connection with its activities under this Agreement other than the cost of (including brokerage commissions, if any) securities purchased for the Portfolio, the cost of any independent pricing service used in valuing the Portfolio's securities and fees and expenses of registering and qualifying shares for distribution under state securities laws.
In addition, if the expenses borne by the Portfolio in any fiscal year exceed the most restrictive applicable expense limitations imposed by the securities regulations of any state in which the Shares are registered or qualified for sale to the public, the Investment Advisor shall reimburse the Portfolio for any excess up to the amount of the fees payable by the Portfolio to it during such fiscal year pursuant to Paragraph 9 hereof; provided, however, that notwithstanding the foregoing, the Investment Advisor shall reimburse the Portfolio for such excess expenses regardless of the amount of such fees payable to it during such fiscal year to the extent that the securities regulations of any state in which the Shares are registered or qualified for sale so require.
9. Compensation.
(a) For the services provided and the expenses assumed pursuant to this Agreement with respect to the Portfolio, the Company will pay the Investment Advisor from the assets of the Portfolio and the Investment Advisor will accept as full compensation therefor a fee, computed daily and payable monthly, at the following annual rate: .40% of the first $250 million of the Portfolio's average daily net assets, .35% of the next $250 million of the Portfolio's average daily net assets, and .30% of the Portfolio's average daily net assets in excess of $500 million.
(b) The fee attributable to the Portfolio shall be satisfied only against the assets of the Portfolio and not against the assets of any other investment portfolio of the Company.
10. Limitation of Liability of the Investment Advisor. The Investment Advisor 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 this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Advisor in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement.
11. Duration and Termination. This Agreement shall become effective with respect to the Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of the Portfolio and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until August 16, 1991. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on August 16, provided such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Company who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio; provided, however, that this Agreement may be terminated with respect to the Portfolio by the Company at any time, without the payment of any penalty, by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' written notice to the Investment Advisor, or by the Investment Advisor at any time, without payment of any penalty, on 90 days' written notice to the Company. This Agreement will immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the 1940 Act.)
12. Amendment of this Agreement. No provision of this Agreement may be changed, discharged or terminated orally, except by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio.
13. Miscellaneous. 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. 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 upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
THE RBB FUND, INC.
By: /s/ Edward Roach
----------------
President
|
PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION
By: /s/ Thomas H. Neim ------------------- President |
Exhibit 5(h)
INVESTMENT ADVISORY AGREEMENT
(New York Municipal Money Portfolio)
AGREEMENT made as of November 5, 1991 between THE RBB FUND, INC., a Maryland corporation (herein called the "Company"), and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (herein called the "Investment Advisor").
WHEREAS, the Company is registered as an open-end, management investment company under the Investment Company Act of 1940 (the "1940 Act") and currently offers or proposes to offer shares representing interests in ten separate investment portfolios; and
WHEREAS, the Company desires to retain the Investment Advisor to render investment advisory services with respect to the Company's New York Municipal Money Market Portfolio (the "Portfolio"), and the Investment Advisor is willing to so render such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Advisor to act as investment advisor to the Company for the Portfolio for the period and on the terms set forth in this Agreement. The Investment Advisor accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Company has furnished the Investment Advisor with copies properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Company, filed with the Secretary of State of Maryland on February 29, 1988, as amended (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, herein called the "Articles of Incorporation");
(b) Articles Supplementary of the Company, filed with the Secretary of State of the State of Maryland on March 24, 1988, April 27, 1990 and on May 1, 1990 and all further Articles of Supplementary filed with the State of Maryland ("Articles Supplementary");
(c) By-Laws of the Company, as amended (such By-Laws, as presently in effect and as they shall from time to time be amended, herein called the "By-Laws");
(d) Resolutions of the Board of Directors of the Company authorizing the appointment of the Investment Advisor and the execution and delivery of this Agreement;
(e) A copy of the Distribution Agreement between the Company and the Company's principal underwriter (the "Distributor") relating to any class of the Portfolio and the form of the related Dealer Agreement, if any, for broker-dealers participating in the distribution of any class of Shares representing interests in the Portfolio ("Participating Dealers");
(f) Each Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act relating to any class of Shares representing interests in the Portfolio and any amendments thereto;
(g) Each Shareholder Servicing Agreement, if any, relating to any class of Shares representing interests in the Portfolio;
(h) Each Non-12b-1 Shareholder Services Plan, if any, relating to any class of Shares representing interests in the Portfolio;
(i) Notification of Registration of the Company under the 1940 Act on Form N-8A as filed with the Securities and Exchange Commission ("SEC") on March 24, 1988 and all amendments thereto;
(j) The most recent Registration Statement of the Company on Form N-1A under the Securities Act of 1933 (the "1933 Act") (File No. 33-20827) and under the 1940 Act relating to the Shares, and all amendments thereto (the "Registration Statement"); and
(k) Each Prospectus relating to any class of Shares representing interests in the Portfolio in effect under the 1933 Act (such prospectuses, as presently in effect and as they shall from time to time be amended and supplemented, are herein collectively called the "Prospectuses").
The Company will furnish the Investment Advisor from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Management of the Portfolio, Subject to the supervision of the Board of Directors of the Company, the Investment Advisor will provide for the overall management of the Portfolio, including (i) the provision of a continuous investment program for the Portfolio, including investment research and management with respect to all securities, investments, cash and cash equivalents in the Portfolio, (ii) the determination from time to time of what securities and other investments will be purchased, retained or sold by the Company for the Portfolio and (iii) the placement of orders for all purchases and sales made for the Portfolio. The Investment Advisor will provide the services rendered by it hereunder in accordance with the investment objectives, restrictions and policies of the Portfolio as stated in the applicable Prospectus and the applicable statement of additional information contained in the Registration Statement. The Investment Advisor further agrees that it will render to the Company's Board of Directors such periodic and special reports as the Board may request.
4. Brokerage. The Investment Advisor may place orders either directly with the issuer or with any broker or dealer. In placing orders with brokers and dealers, the Investment Advisor will attempt to obtain the best price and the most favorable execution of its orders. In placing orders, the Investment Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. Consistent with this obligation, the Investment Advisor may, 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 Portfolio and other clients of the Investment Advisor. Information and research received from such brokers will be in addition to, and not in lieu of, the services required to be performed by the Investment Advisor hereunder. 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 the Investment Advisor determines in good faith that such commission is reasonable in terms either of the transaction or the overall responsibility of the Investment Advisor to the Portfolio and its other clients and that the total commissions paid by the Portfolio will be reasonable in relation to the benefits to the Portfolio over the long-term. In no instance will the Portfolio's securities be purchased from or sold to the Distributor, the Investment Advisor or any affiliated person thereof, except to the extent permitted by SEC exemptive order or by applicable law.
5. Conformity with Law; Confidentiality. The Investment Advisor further agrees that it will comply with all applicable Rules and Regulations of all Federal regulatory agencies having jurisdiction over the Investment Advisor in the performance of its duties hereunder (herein called the "Rules"). The Investment Advisor will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Investment Advisor 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 Company.
6. Services Not Exclusive. The investment management services rendered by the Investment Advisor hereunder are not to be deemed exclusive, and the Investment Advisor shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby.
7. Books and Records. In compliance with the requirements of Rule 31a-3 of the Rules, the Investment Advisor hereby agrees that all records which it maintains for the Portfolio are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Investment Advisor further agrees to preserve for the periods prescribed by Rule 31a-2 the records required to be maintained by Rule 31a-1 of the Rules.
8. Expenses. During the term of this Agreement, the Investment Advisor will pay all expenses incurred by it in connection with its activities as investment advisor under this Agreement other than the cost of (including brokerage commissions, if any) securities purchased for the Portfolio, the cost of any independent pricing service used in valuing the Portfolio's securities and fees, the cost of administrative, custodian or transfer agent services, and expenses of registering and qualifying shares for distribution under state securities laws.
In addition, if the expenses borne by the Portfolio in any fiscal year exceed the most restrictive applicable expense limitations imposed by the securities regulations of any state in which the Shares are registered or qualified for sale to the public, the Investment Advisor shall reimburse the Portfolio for any excess up to the amount of the fees payable by the Portfolio to it during such fiscal year pursuant to Paragraph 9 hereof; provided, however, that notwithstanding the foregoing, the Investment Advisor shall reimburse the Portfolio for such excess expenses regardless of the amount of such fees payable to it during such fiscal year to the extent that the securities regulations of any state in which the Shares are registered or qualified for sale so require.
9. Compensation.
(a) For the services provided and the expenses assumed pursuant to this Agreement with respect to the Portfolio, the Company will pay the Investment Advisor from the assets of the Portfolio and the Investment Advisor will accept as full compensation therefore a fee, computed daily and payable monthly, at the following annual rate: .35% of the first $250 million of the Portfolio's average daily net assets, .30% of the next $250 million of the Portfolio's average daily net assets, and .25% of the Portfolio's average daily net assets in excess of $500 million.
(b) The fee attributable to the Portfolio shall be satisfied only against the assets of the Portfolio and not against the assets of any other investment portfolio of the Company.
10. Limitation of Liability of the Investment Advisor. The Investment Advisor 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 this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Advisor in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement.
11. Duration and Termination. This Agreement shall become effective with respect to the Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of the Portfolio and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until August 16, 1992. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on August 16, provided such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Company who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio; provided, however, that this Agreement may be terminated with respect to the Portfolio by the Company at any time, without the payment of any penalty, by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' written notice to the Investment Advisor, or by the Investment Advisor at any time, without payment of any penalty, on 90 days' written notice to the Company. This Agreement will immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the 1940 Act.)
12. Amendment of this Agreement. No provision of this Agreement may be changed, discharged or terminated orally, except by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio.
13. Miscellaneous. 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. 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 upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
(Corporate Seal) THE RBB FUND, INC.
Attest: ______________ By: /s/ Edward J. Roach
-------------------
President
(Corporate Seal) PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
Attest: ______________ By: /s/ Thomas H. Neim
------------------
President
|
Exhibit 5(i)
INVESTMENT ADVISORY AGREEMENT
(Tax-Free Money Market Portfolio)
AGREEMENT made as of April 21, 1992 between THE RBB FUND, INC., a Maryland corporation (herein called the "Company"), and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (herein called the "Investment Advisor").
WHEREAS, the Company is registered as an open-end, management investment company under the Investment Company Act of 1940 (the "1940 Act") and currently offers or proposes to offer shares representing interests in nine separate investment portfolios; and
WHEREAS, the Company desires to retain the Investment Advisor to render investment advisory services with respect to the Company's Tax-Free Money Market Portfolio (the "Portfolio"), and the Investment Advisor is willing to so render such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Advisor to act as investment advisor to the Company for the Portfolio for the period and on the terms set forth in this Agreement. The Investment Advisor accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Company has furnished the Investment Advisor with copies properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Company, filed with the Secretary of State of Maryland on February 29, 1988, as amended (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, herein called the "Articles of Incorporation");
(b) Articles Supplementary of the Company, filed with the Secretary of State of the State of Maryland on March 24, 1988, April 27, 1990 and on May 1, 1990 and all further Articles of Supplementary filed with the State of Maryland ("Articles Supplementary");
(c) By-Laws of the Company, as amended (such By-Laws, as presently in effect and as they shall from time to time be amended, herein called the "By-Laws");
(d) Resolutions of the Board of Directors of the Company authorizing the appointment of the Investment Advisor and the execution and delivery of this Agreement;
(e) A copy of the Distribution Agreement between the Company and the company's principal underwriter (the "Distributor") relating to any class of Shares representing an interest in the Portfolio and the form of the related Dealer Agreement, if any, for broker-dealers participating in the distribution of any class of Shares representing an interest in the Portfolio ("Participating Dealers");
(f) Each Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act relating to any class of Shares representing an interest in the Portfolio and any amendments thereto;
(g) Each Shareholder Servicing Agreement, if any, relating to any class of Shares representing an interest in the Portfolio;
(h) Each Non-12b-1 Shareholder Services Plan, if any, relating to any class of Shares representing an interest in the Portfolio;
(i) Notification of Registration of the Company under the 1940 Act on Form N-8A as filed with the Securities and Exchange Commission ("SEC") on March 24, 1988 and all amendments thereto;
(j) The most recent Registration Statement of the Company on Form N-1A under the Securities Act of 1933 (the 1933 Act") (File No. 33-20827) and under the 1940 Act relating to the Shares, and all amendments thereto (the "Registration Statement"); and
(k) Each Prospectus relating to any class of Shares representing an interest in the Portfolio in effect under the 1933 Act (such prospectuses, as presently in effect and as they shall from time to time be amended and supplemented, are herein collectively called the "Prospectuses").
The Company will furnish the Investment Advisor from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Management of the Portfolio. Subject to the supervision of the Board of Directors of the Company, the Investment Advisor will provide for the overall management of the Portfolio, including (i) the provision of a continuous investment program for the Portfolio, including investment research and management with respect to all securities, investments, cash and cash equivalents in the Portfolio, (ii) the determination from time to time of what securities and other investments will be purchased, retained or sold by the Company for the Portfolio and (iii) the placement of orders for all purchases and sales made for the Portfolio. The Investment Advisor will provide the services rendered by it hereunder in accordance with the investment objectives, restrictions and policies of the Portfolio as stated in the applicable Prospectus and the applicable statement of additional information contained in the Registration Statement. The Investment Advisor further agrees that it will render to the Company's Board of Directors such periodic and special reports as the Board may request.
4. Brokerage. The Investment Advisor may place orders either directly with the issuer or with any broker or dealer. In placing orders with brokers and dealers, the Investment Advisor will attempt to obtain the best price and the most favorable execution of its orders. In placing orders, the Investment Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. Consistent with this obligation, the Investment Advisor may, 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 Portfolio and other clients of the Investment Advisor. Information and research received from such brokers will be in addition to, and not in lieu of, the services required to be performed by the Investment Advisor hereunder. 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 the Investment Advisor determines in good faith that such commission is reasonable in terms either of the transaction or the overall responsibility of the Investment Advisor to the Portfolio and its other clients and that the total commissions paid by the Portfolio will be reasonable in relation to the benefits to the Portfolio over the long-term. In no instance will the Portfolio's securities be purchased from or sold to the Distributor, the Investment Advisor or any affiliated person thereof, except to the extent permitted by SEC exemptive order or by applicable law.
5. Conformity with Law; Confidentiality. The Investment Advisor further agrees that it will comply with all applicable Rules and Regulations of all Federal regulatory agencies having jurisdiction over the Investment Advisor in the performance of its duties hereunder (herein called the "Rules"). The Investment Advisor will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present or potential shareholders, and will not use such-records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Investment Advisor 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 Company.
6. Services Not Exclusive. The investment management services rendered by the Investment Advisor hereunder are not to be deemed exclusive, and the Investment Advisor shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby.
7. Books and Records. In compliance with the requirements of Rule 31a-3 of the Rules the Investment Advisor hereby agrees that all records which it maintains for the Portfolio are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Investment Advisor further agrees to preserve for the periods prescribed by Rule 31a-2 the records required to be maintained by Rule 31a-1 of the Rules.
8. Expenses. During the term of this Agreement, the Investment Advisor will pay all expenses incurred by it in connection with its activities as investment advisor under this Agreement other than the cost of (including brokerage commissions, if any) securities purchased for the Portfolio, the cost of any independent pricing service used in valuing the Portfolio's securities and fees, the cost of administrative, custodian or transfer agent services, and expenses of registering and qualifying shares for distribution under state securities laws.
In addition, if the expenses borne by the Portfolio in any fiscal year exceed the most restrictive applicable expense limitations imposed by the securities regulations of any state in which the Shares are registered or qualified for sale to the public, the Investment Advisor shall reimburse the Portfolio for any excess up to the amount of the fees payable by the Portfolio to it during such fiscal year pursuant to Paragraph 9 hereof; provided, however, that notwithstanding the foregoing, the Investment Advisor shall reimburse the Portfolio for such excess expenses regardless of the amount of such fees payable to it during such fiscal year to the extent that the securities regulations of any state in which the Shares are registered or qualified for sale so require.
9. Compensation.
(a) For the services provided and the expenses assumed pursuant to this Agreement with respect to the Portfolio, the Company will pay the Investment Advisor from the assets of the Portfolio and the Investment Advisor will accept as full compensation therefore a fee, computed daily and payable monthly, at the following annual rate: .35% of the first $250 million of the Portfolio's average daily net assets .30% of the next $250 million of the Portfolio's average daily net assets, and .25% of the Portfolio's average daily net assets in excess of $500 million.
(b) The fee attributable to the Portfolio shall be satisfied only against the assets of the Portfolio and not against the assets of any other investment portfolio of the Company.
10. Limitation of Liability of the Investment Advisor. The Investment Advisor 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 this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Advisor in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement.
11. Duration and Termination. This Agreement shall become effective with respect to the Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of the Portfolio and, unless sooner terminated as provided herein, shall continue with respect to the Portfolio until April 21, 1993. Thereafter, if not terminated, this Agreement shall continue with respect to the Portfolio for successive annual periods ending on April 21, provided such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board of Directors of the Company who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio; provided, however, that this Agreement may be terminated with respect to the Portfolio by the Company at any time, without the payment of any penalty, by the Board of Directors of the Company or by vote of a majority of the outstanding voting securities of the Portfolio, on 60 days' written notice to the Investment Advisor, or by the Investment Advisor at any time, without payment of any penalty, on 90 days' written notice to the Company. This Agreement will immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the 1940 Act.)
12. Amendment of this Agreement. No provision of this Agreement may be changed, discharged or terminated orally, except by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting the Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Portfolio.
13. Miscellaneous. 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. 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 upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
(Corporate Seal) THE RBB FUND, INC.
Attest: ______________ By: /s/ Edward J. Roach
-------------------
President
(Corporate Seal) PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
Attest: ______________ By: /s/ Thomas K. Neim
------------------
President
|
Exhibit 8(a)
CUSTODIAN AGREEMENT
THIS AGREEMENT is made as of August 16, 1988 by and between THE RBB FUND, INC., a Maryland corporation (the "Fund"), and PROVIDENT NATIONAL BANK, a national banking association ("Provident").
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 '11940 Act"); and
WHEREAS, the Fund desires to retain Provident to serve as the Fund's custodian and Provident is willing to serve as the Fund's custodian;
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 Provident to act as
custodian of the securities, cash and other property belonging to each
investment portfolio (a "portfolio") of the Fund for the period and on the
terms set forth in this Agreement. Provident accepts such appointment and
agrees to furnish the services herein set forth in return for the compensation
as provided in Paragraph 21 of this Agreement. Provident agrees to comply with
all relevant provisions of the 1940 Act and applicable rules and regulations
thereunder. The Fund's Common Stock, $.001 par value (the "Shares") has been as
of the date hereof classified into fourteen different classes of Common Stock:
the "Class A Shares" the "Class B Shares", the "Class C Shares", the "Class D
Shares", the "Class E Shares' the "Class F Shares", the "Class G Shares", the
"Class H Shares", the "Class I Shares", the "Class J Shares", the "Class K
Shares", the "Class L Shares", the "Class M Shares", and the "Class N Shares",
respectively. The Fund may from time to time issue additional series or classes
of Shares or classify and reclassify shares of such series or class. Provident
shall identify to each such series or class property belonging to such series
or class and in such reports, confirmations and notices to the Fund called for
Under this Agreement shall identify the series or class to which such report,
confirmation or notice pertains.
2. Delivery of Documents. The Fund has furnished Provident with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the appointment of Provident as custodian of the portfolio securities, cash and other property belonging to the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Fund's officers and/or other persons authorized to issue Oral Instructions and to sign Written Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Articles of Incorporation filed with the Department of Assessments and Taxation of the State of Maryland on February 29, 1988 and all amendments thereto (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, are herein called the "Charter");
(d) The Fund's Articles Supplementary filed with Department of Assessments and Taxation of the State of Maryland on March 24, 1988 and further Articles Supplementary filed with the State of Maryland (the "Articles Supplementary").
(e) The Fund's By-Laws and all amendments thereto (such By-Laws, as presently in effect and as they shall from time to time be amended, are herein called the "By-Laws");
(f) Each Investment Advisory and Administration Agreement between Provident Institutional Management Corporation (the "Advisor") and the Fund on behalf of a class or series of the Fund (collectively, the "Advisory Agreements") and each Sub-Advisory Agreement between Provident (which in its capacity as Sub-Advisor is hereinafter referred to as the "Sub-Advisor") and the Advisor on behalf of a class or series of the Fund (collectively with the Advisory Agreements, the "Advisory Contracts");
(g) Each Distribution Agreement between Planco Financial Services, Inc. ("Planco") and the Fund with respect to a class or series of the Fund (collectively, the "Distribution Agreements") and the form of each related Dealer Agreement for broker-dealers participating in the distribution of any class or series of the Fund;
(h) Each Plan of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940 with respect to a class or series of the Fund (collectively, the "Distribution Plans");
(i) Each Transfer Agency Agreement between Provident Financial Processing Corporation (the "Transfer Agent")
and the Fund with respect to a class or classes of the Fund (collectively. the "Transfer Agency Agreements");
(j) Each Shareholder Servicing Agreement with respect to a class or series of the Fund (collectively, the "Shareholder Servicing Agreements");
(k) Each Non-12b-l Shareholder Services Plan with respect to a class or series of the Fund (collectively, the "Shareholder Services Plans");
(1) The Fund's Notification of Registration filed pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the Securities and Exchange Commission ("SEC") on March 24, 1988 and all amendments thereto;
(m) The Fund's most recent Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-20827) and under the 1940 Act filed with the SEC on March 24, 1988 relating to the Shares, and all amendments thereto;
(n) The Fund's most recent prospectuses relating .to any of the Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares, Class L Shares, Class M Shares, and Class N Shares (each such prospectus as presently in effect and all amendments and supplements thereto herein called a "Prospectus"); and
(o) In the event that a Prospectus provides that a
portfolio of the Fund may engage in any transactions regulated by the Commodity
Futures Trading Commission ("CFTC"), before the Fund so engages on behalf of
such portfolio, a copy of either (i) a filed notice of eligibility to claim the
exclusion from the definition of "commodity pool operator" contained in Section
2(a)(1)(A) of the Commodity Exchange Act ("CEA") that is provided in Rule 4.5
under the CEA, together with all supplements as are required by the CFTC, or
(ii) a letter which has been granted the Fund by the CFTC which states that the
Fund will not be treated as a "pool" as defined in Section 4.10(d) of the CFTC's
General Regulations, or (iii) a letter which has been granted the Fund by the
CFTC which states that the CFTC will not take any enforcement action if the Fund
does not register as a "commodity pool operator."
The Fund will furnish Provident from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term "Authorized Person" means any of the officers of the Fund and any other person. whether or not any such person is an officer or employee of the Fund, duly authorized by the Board of Directors of the Fund to give Oral and Written Instructions on behalf of the Fund and listed on the Certificate annexed hereto as Appendix A or any amendment thereto as may be received by Provident from time to time.
(b) "Book-Entry System". As used in this Agreement, the term "Book-Entry System" means the Federal Reserve/Treasury book-entry system for United States and federal agency securities, its successor or successors and its nominee or nominees and any book-entry system maintained by a clearing agency registered with the SEC under Section 17A of the Securities Exchange Act of 1934 (the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term "Oral Instructions" means oral instructions actually received by Provident from an Authorized Person or from a person reasonably believed by Provident to be an Authorized Person. The Fund agrees to deliver to Provident, at the time and in the manner specified in Paragraph 8(b) of this Agreement, Written Instructions confirming Oral Instructions.
(d) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property which the Fund may from time to time deposit, or cause to be deposited, with Provident or which Provident may from time to time hold for the Fund;
(ii) all income in respect of any of such securities or other property;
(iii) all proceeds of the sale of any of such securities or other property; and
(iv) all proceeds of the sale of securities issued by the Fund, which are received by Provident from time to time from or on behalf of the Fund.
(e) "Written Instructions". As used in this Agreement, the term "Written Instructions" means written instructions delivered by hand, mail, tested telegram, cable, telex or facsimile sending device, and received by Provident and signed by an Authorized Person.
4. Delivery and Registration of the Property. The Fund will deliver or cause to be delivered to Provident all securities and all moneys owned by it, including cash received for the issuance of its Shares. at any time during the period of this Agreement. Provident will not be responsible for such securities and such moneys until actually received by it. All securities delivered to Provident (other than in bearer form) shall be registered in the name of the Fund or in the name of a nominee of the Fund or in the name of any nominee of Provident (with or without indication of fiduciary status), or in the name of any sub-custodian or any nominee of any such sub-custodian appointed pursuant to Paragraph 6 hereof or shall be properly endorsed and in form for transfer satisfactory to Provident.
5. Receipt and Disbursement of Money.
(a) Provident shall open and maintain a separate custodial account or accounts in the name of each portfolio of the Fund, subject only to draft or order by Provident acting pursuant to the terms of this Agreement and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund. Provident shall make payments of cash to, or for the account of, each portfolio of the Fund from such cash only (i) for the purchase of securities for the Fund's portfolios as provided in Paragraph 13 hereof; (ii) upon receipt of Written Instructions, for the payment of interest, dividends, taxes, administration, accounting, distribution, advisory or management fees or expenses which are to be borne by the Fund under the terms of this Agreement, the Advisory Contracts, the Transfer Agency Agreements the Distribution Agreements and the Shareholder Servicing Agreements; (iii) upon receipt of Written Instructions, for payments in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Fund and held by or to be delivered to Provident; (iv) to a sub-custodian pursuant to Paragraph 6 hereof; (v) for the redemption of Fund Shares; (vi) for payment of the amount of dividends received in respect of securities sold short; or (vii) upon receipt of Written Instructions, for other proper Fund purposes. No payment pursuant to (i) above shall be made unless Provident has received a copy of the broker's or dealer's confirmation or the payee's invoice, as appropriate.
(b) Provident is hereby authorized to endorse and collect all checks, drafts or other orders for the payment of money received as custodian for the account of the Fund.
6. Receipt of Securities.
(a) Except as provided by Paragraph 7 hereof, Provident shall hold and physically segregate in separate
accounts, identifiable at all times from those of any other persons, firms, or corporations, all securities and non-cash property received by it for the account of each portfolio of the Fund. All such securities and non-cash property are to be held or disposed of by Provident for each portfolio of the Fund pursuant to the terms of this Agreement. In the absence of Written Instructions accompanied by a certified resolution of the Fund's Board of Directors authorizing the transaction, Provident shall have no power or authority to withdraw, deliver, assign, hypothecate, pledge or otherwise dispose of any such securities and investments except in accordance with the express terms provided for in this Agreement. In no case may any Director, officer, employee or agent of the Fund withdraw any securities. In connection with its duties under this Paragraph 6, Provident may, at its own expense, enter into sub-custodian agreements with other banks or trust companies for the receipt of certain securities and cash to be held by Provident for the account of the Fund pursuant to this Agreement; provided that each such bank or trust company has an aggregate capital, surplus and undivided profits, as shown by its last published report, of not less than one million dollars ($1,000,000) for a Provident subsidiary or affiliate, or of not less than twenty million dollars ($20,000,000) if such bank or trust company is not a Provident subsidiary or affiliate and that in either case such bank or trust company agrees with Provident to comply with all relevant provisions of the 1940 Act and applicable rules and regulations thereunder. Provident shall remain responsible for the performance of all of its duties under this Agreement and shall hold the Fund harmless from the acts and omissions, under the standards of care provided for herein, of any bank or trust company that it might choose pursuant to this Paragraph 6.
(b) Where securities are transferred to an account of the Fund established pursuant to Paragraph 7 hereof, Provident shall also by book-entry or otherwise identify as belonging to the applicable portfolio of Fund the quantity of securities in a fungible bulk of securities registered in the name of Provident (or its nominee) or shown in Provident's account on the books of the Book-Entry System. At least monthly and from time to time, Provident shall furnish the Fund with a detailed statement of the Property held for each portfolio of the Fund under this Agreement.
7. Use of Book-Entry System. The Fund shall deliver to Provident certified resolutions of the Board of Directors of the Fund approving, authorizing and instructing Provident on a continuous and on-going basis until instructed to the contrary by Oral or Written Instructions actually received by Provident (a) to deposit in the Book-Entry System all securities belonging to each portfolio of the Fund eligible for deposit therein and (b) to utilize the Book-Entry System to the extent possible in
connection with settlements of purchases and sales of securities by each portfolio of the Fund, and deliveries and returns of securities loaned, subject to repurchase agreements or used as collateral in connection with borrowings. Without limiting the generality of such use, it is agreed that the following provisions shall apply thereto:
(a) Securities and any cash of a portfolio of the Fund deposited in the Book-Entry System will at all times be segregated from any assets and cash controlled by Provident in other than a fiduciary or custodian capacity but may be commingled with other assets held in such capacities. Provident and its sub-custodian, if any, will pay out money only upon receipt of securities and will deliver securities only upon the receipt of money.
(b) All books and records maintained by Provident which relate to the Fund's participation in the Book-Entry System will at all times during Provident's regular business hours be open to the inspection of the Fund's duly authorized employees or agents, and the Fund will be furnished with all information in respect of the services rendered to it as it may require.
(c) Provident will provide the Fund with copies of any report obtained by Provident on the system of internal accounting control of the Book-Entry System promptly after receipt of such a report by Provident. Provident will also provide the Fund with such reports on its own system of internal control as the Fund may reasonably request from time to time.
8. Instructions Consistent with Charter and By-Laws.
(a) Unless otherwise provided in this Agreement, Provident shall act only upon Oral and Written Instructions. Although Provident may know of the provisions of the Charter and By-Laws of the Fund, Provident may assume that any Oral or Written Instructions received hereunder are not in any way inconsistent with any provisions of such Charter or By-Laws or any vote, resolution or proceeding of the Shareholders, or of the Board of Directors, or of any committee thereof.
(b) Provident shall be entitled to rely upon any Oral Instructions and any Written Instructions actually received by Provident pursuant to this Agreement. The Fund agrees to forward to Provident Written Instructions confirming Oral Instructions in such manner that the Written Instructions are received by Provident by the close of business of the same day that such Oral Instructions are given to Provident. The Fund agrees that the fact that such confirming Written Instructions are not received by Provident shall in no way affect the validity of the transactions or enforceability of the transactions
authorized by the Fund by giving Oral Instructions. The Fund agrees that Provident shall incur no liability to the Fund in acting upon Oral Instructions given to Provident hereunder concerning such transactions provided such instructions reasonably appear to have been received from an Authorized Person.
9. Transactions Not Requiring Instructions. In the absence of contrary Written Instructions, Provident is authorized to take the following actions:
(a) Collection of Income and Other Payments. Provident shall:
(i) collect and receive for the account of each portfolio of the Fund, all income and other payments and distributions, including (without limitation) stock dividends, rights, bond coupons, option premiums and similar items, included or to be included in the Property, and promptly advise the Fund of such receipt and shall credit such income, as collected, to the applicable portfolio's custodian account;
(ii) endorse and deposit for collection, in the name of the applicable portfolio of the Fund, checks, drafts. or other orders for the payment of money on the same day as received;
(iii) receive and hold for the account of each portfolio of the Fund all securities received as a distribution on the portfolio's securities as a result of a stock dividend, share split-up or reorganization, recapitalization, readjustment or other rearrangement or distribution of rights or similar securities issued with respect to any securities belonging to the portfolio held by Provident hereunder;
(iv) present for payment and collect the amount payable upon all securities which may mature or be called, redeemed, or retired, or otherwise become payable on the date such securities become payable; and
(v) take any action which may be necessary and proper in connection with the collection and receipt of such income and other payments and the endorsement for collection of checks, drafts, and other negotiable instruments as described in Paragraph 24 of this Agreement.
(b) Miscellaneous Transactions. Provident is authorized to deliver or cause to be delivered Property against
payment or other consideration or written receipt therefor in the following cases:
(i) for examination by a broker selling for the account of a portfolio of the Fund in accordance with street delivery custom;
(ii) for the exchange of interim receipts or temporary securities for definitive securities; and
(iii) for transfer of securities into the name of a portfolio of the Fund or Provident or nominee of either, or for exchange of securities for a different number of bonds, certificates, or other evidence, representing the same aggregate face amount or number of units bearing the same interest rate, maturity date and call provisions, if any; provided that, in any such case, the new securities are to be delivered to Provident.
10. Transactions Requiring Instructions. Upon receipt of Oral or Written Instructions and not otherwise, Provident, directly or through the use of the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in such Oral or Written Instructions, proxies, consents, authorizations, and any other instruments whereby the authority of the Fund as owner of any securities on behalf of a portfolio may be exercised;
(b) deliver any securities held for a portfolio of the Fund against receipt of other securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, tender offer, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege;
(c) deliver any securities held for a portfolio of the Fund to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation. recapitalization or sale of assets of any corporation, and receive and hold under the terms of this Agreement such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of a portfolio of the Fund and take such other steps as shall be stated in said Oral or Written Instructions to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of the Fund;
(e) release securities belonging to a portfolio of the Fund to any bank or trust company for the purpose of pledge or hypothecation to secure any loan incurred by a portfolio of the Fund; provided, however, that securities shall be released only upon payment to Provident of the monies borrowed, except that in cases where additional collateral is required to secure a borrowing already made, subject to proper prior authorization, further securities may be released for that purpose; and repay such loan upon redelivery to it of the securities pledged or hypothecated therefor and upon surrender of the note or notes evidencing the loan;
(f) release and deliver securities owned by a portfolio of the Fund in connection with any repurchase agreement entered into on behalf of a portfolio of the Fund, but only on receipt of payment therefor; and pay out moneys of a portfolio of the Fund in connection with such repurchase agreements, but only upon the delivery of the securities; and
(g) otherwise transfer, exchange or deliver securities in accordance with Oral or Written Instructions.
11. Segregated Accounts.
(a) Provident shall upon receipt of Written or Oral Instructions establish and maintain a segregated account or accounts on its records for and on behalf of each portfolio of the Fund, into which account or accounts may be transferred cash and/or securities, including securities in the Book-Entry System (i) for the purposes of compliance by the Fund with the procedures required by a securities or option exchange, providing such procedures comply with the 1940 Act and Release No. 10666 or any subsequent release or releases of the SEC relating to the maintenance of segregated accounts by registered investment companies, and (ii) for other proper corporate purposes, but only, in the case of clause (ii), upon receipt of Written Instructions.
(b) Provident may enter into separate custodial agreements with various futures commission merchants ("FCMs") that the Fund uses (each an "FCM Agreement"). pursuant to which the Fund's margin deposits in any transactions involving futures contracts and options on futures contracts will be held by Provident in accounts (each an "FCM Account") subject to the disposition by the FCM involved in such contracts in accordance with the customer contract between FCM and the Fund ("FCM
Contract"), SEC rules governing such segregated accounts, CFTC rules and the rules of the applicable commodities exchange. Such FCM Agreements shall only be entered into upon receipt of Written Instructions from the Fund which state that (i) a customer agreement between the FCM and the Fund has been entered into; and (ii) the Fund is in compliance with all the rules and regulations of the CFTC. Transfers of initial margin shall be made into an FCM Account only upon Written Instructions; transfers of premium and variation margin may be made into an FCM Account pursuant to Oral Instructions. Transfers of funds from an FCM Account to the FCM for which Provident holds such an account may only occur upon certification by the FCM to Provident that pursuant to the FCM Agreement and the FCM Contract, all conditions precedent to its right to give Provident such instruction have been satisfied.
12. Dividends and Distributions. The Fund shall furnish Provident with appropriate evidence of action by the Fund's Board of Directors declaring and authorizing the payment of any dividends and distributions. With respect to each portfolio of the Fund, upon receipt by Provident of Written Instructions with respect to dividends and distributions declared by the Fund's Board of Directors and payable to Shareholders who have elected in the proper manner to receive their distributions or dividends in cash, and in conformance with procedures mutually agreed upon by Provident, the Fund, and the Fund's Transfer Agent, Provident shall pay to the Fund's Transfer Agent, as agent for the Shareholders, an amount equal to the amount indicated in said Written Instructions as payable by each portfolio of the Fund to such Shareholders for distribution in cash by the Transfer Agent to such Shareholders. In lieu of paying the Fund's Transfer Agent cash dividends and distributions, Provident may arrange for the direct payment of cash dividends and distributions to Shareholders by Provident in accordance with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, Provident and the Fund's Transfer Agent.
In accordance with the applicable Prospectus, the Internal Revenue Code and regulations promulgated thereunder, and with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, Provident and the Fund's Transfer Agent, Provident shall arrange for the establishment of IRA custodian accounts for such Shareholders holding Shares through IRA accounts.
13. Purchases of Securities. Promptly after each decision to
purchase securities by the Advisor, the Fund, through the Advisor, shall deliver
to Provident Oral Instructions specifying with respect to each such purchase:
(a) the name of the issuer and the title of the securities, (b) the number of
shares or the principal amount purchased and accrued interest, if
any, (c) the date of purchase and settlement, (d) the purchase price per unit,
(e) the total amount payable upon such purchase, (f) the name of the person from
whom or the broker through whom the purchase was made, and (g) the portfolio of
the Fund to which such purchase applies. Provident shall upon receipt of
securities purchased by or for a portfolio of the Fund pay out of the moneys
held for the account of such portfolio of the Fund the total amount payable to
the person from whom or the broker through whom the purchase was made, provided
that the same conforms to the total amount payable as set forth in such Oral
Instructions.
14. Sales of Securities. Promptly after each decision to sell securities by the Advisor or exercise of an option written by the Fund, the Fund, through the Advisor, shall deliver to Provident Oral Instructions, specifying with respect to each such sale: (a) the name of the issuer and the title of the security, (b) the number of shares or principal amount sold, and accrued interest, if any, (c) the date of sale, (d) the sale price per unit, (e) the total amount payable to the Fund upon such sale, (f) the name of the broker through whom or the person to whom the sale was made, and (g) the portfolio of the Fund to which such sale applies. Provident shall deliver the securities -upon receipt of the total amount payable to the Fund upon such sale, provided that the same conforms to the total amount payable as set forth in such Oral Instructions. Subject to the foregoing, Provident may accept payment in such form as shall be satisfactory to it, and may deliver securities and arrange for payment in accordance with the customs prevailing among dealers in securities.
15. Records. The books and records pertaining to the Fund which are in the possession of Provident 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 regulations and shall, to the extent practicable, be maintained separately for each portfolio of the Fund. The Fund, or the Fund's authorized representatives, shall have access to such books and records at all times during Provident's normal business hours. Upon the reasonable request of the Fund. copies of any such books and records shall be provided by Provident to the Fund or the Fund's authorized representative at the Fund's expense.
16. Reports.
(a) Provident shall furnish the Fund the following reports:
(1) such periodic and special reports as the Fund may reasonably request;
(2) a monthly statement summarizing all transactions and entries for the account of each portfolio of the Fund, listing the portfolio securities belonging to each portfolio of the Fund with the adjusted average cost of each issue and the market value at the end of such month, and stating the cash account of each portfolio of the Fund including disbursements;
(3) the reports to be furnished to the Fund pursuant to Rule 17f-4; and
(4) such other Information as may be agreed upon from time to time between the Fund and Provident.
(b) Provident shall transmit promptly to the Fund any proxy statement, proxy materials, notice of a call or conversion or similar communications received by it as Custodian of the Property.
17. Cooperation with Accountants. Provident shall cooperate with the Fund's independent public accountants and shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as such may be required from time to time by the Fund.
18. Confidentiality. Provident agrees on behalf of itself and its employees to treat confidentially all records and other information relative to the Fund and its prior, present, or potential Shareholders, 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 Provident 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.
19. Right to Receive Advice.
(a) Advice of Fund. If Provident shall be in doubt as to any action to be taken or omitted by it, it may request, and shall receive, from the Fund directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If Provident shall be in doubt as to any question of law involved in any action to be taken or omitted by Provident, it may request advice at its own cost from counsel of its own choosing (who may be counsel for the Advisor, the Fund or Provident, at the option of Provident).
(c) Conflicting Advice. In case of conflict between directions, advice or Oral or Written Instructions received by Provident pursuant to subparagraph (a) of this paragraph and advice received by Provident pursuant to subparagraph (b) of this paragraph. Provident shall be entitled to rely on and follow the advice received pursuant to the latter provision alone.
(d) Protection of Provident. Provident shall be protected in any action or inaction which it takes in reliance on any directions, advice or Oral or Written Instructions received pursuant to subparagraphs (a) or (b) of this paragraph which Provident, after receipt of any such directions, advice or Oral or Written Instructions, in good faith believes to be consistent with such directions, advice or Oral or Written Instructions, as the case may be. However, nothing in this paragraph shall be construed as imposing upon Provident any obligation (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions when received, unless, under the terms of another provision of this Agreement. the same is a condition to Provident's properly taking or omitting to take such action. Nothing in this subsection shall excuse Provident when an action or omission on the part of Provident constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by Provident of any duties or obligations under this Agreement.
20. Compliance with Governmental Rules and Regulations. Provident. assumes no responsibility for insuring that the Fund complies with all applicable requirements of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act, the CEA, and any laws, rules and regulations of governmental authorities having jurisdiction.
21. Compensation. As compensation for the services rendered by Provident during the term of this Agreement, the Fund will pay to Provident, with respect to each portfolio of the Fund, monthly fees that shall be agreed upon from time to time in writing by Provident and the Fund.
22. Indemnification. The Fund, as sole owner of the Property,
agrees to indemnify and hold harmless Provident and its nominees from all
taxes, charges, expenses, assessments, claims and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the 1934 Act, the
1940 Act, the CEA, 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
(a) from the fact that securities included in the Property are registered in
the name of any such nominee or (b) without limiting the generality of the
foregoing clause (a) from
any action or thing which Provident takes or does or omits to take or do (i) at
the request or on the direction of or in reliance on the advice of the Fund or
(ii) upon Oral or Written Instructions, provided, that neither Provident 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
Provident's or such nominee's own willful misfeasance, bad faith, negligence or
reckless disregard of its duties or responsibilities specifically described in
this Agreement. In the event of any advance of cash for any purpose made by
Provident resulting from Oral or Written Instructions of the Fund, or in the
event that Provident or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the account of the Fund shall be security
therefor.
23. Responsibility of Provident. Provident 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 Provident in writing. In the
performance of its duties hereunder, Provident shall be obligated to exercise
care and diligence and to act in good faith and to use its best efforts within
reasonable limits to insure the accuracy and completeness of all services
performed under this Agreement. Provident shall be responsible for its own
negligent failure to perform its duties under this Agreement. but to the extent
that duties, obligations and responsibilities are not expressly set forth in
this Agreement, Provident shall not be liable for any act or omission which
does not constitute willful misfeasance, bad faith or gross negligence on the
part of Provident or reckless disregard of such duties, obligations and
responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, Provident 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 Oral or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this Agreement. if
any, and which Provident reasonably believes to be genuine; (b) the validity or
invalidity of the issuance of any securities included or to be included in the
Property. the legality or illegality of the purchase of such securities, or the
propriety or impropriety of the amount paid therefor; (c) the legality or
illegality of the sale (or exchange) of any Property or the propriety or
impropriety of the amount for which such Property is sold (or exchanged); or
(d) delays or errors or loss of data occurring by reason of circumstances
beyond Provident'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, nor shall Provident be under any duty or obligation to ascertain whether any Property at any time delivered to or held by Provident may properly be held by or for the Fund.
24. Collections. All collections of monies or other property in respect, or which are to become part, of the Property (but not the safekeeping thereof upon receipt by Provident) shall be at the sole risk of the Fund. In any case in which Provident does not receive any payment due the Fund within a reasonable time after Provident has made proper demands for the same, it shall so notify the Fund in writing, including copies of all demand letters, any written responses thereto, and memoranda of all oral responses thereto and to telephonic demands, and await instructions from the Fund. Provident shall not be obliged to take legal action for collection unless and until reasonably indemnified to its satisfaction. Provident shall also notify the Fund as soon as reasonably practicable whenever income due on securities is not collected in due course.
25. Duration and Termination. This Agreement shall continue with respect to each portfolio of the Fund until termination by the Fund on behalf of a portfolio or by Provident, in either case on sixty (60) days written notice. Upon any termination of this Agreement, pending appointment of a successor to Provident or vote of the shareholders of the applicable portfolio of the Fund to dissolve or to function without a custodian of its cash, securities or other property, Provident shall not deliver cash, securities or other property of the applicable portfolio of the Fund to the Fund, but may deliver them to a bank or trust company of its own selection, having an aggregate capital, surplus and undivided profits, as shown by its last published report, of not less than twenty million dollars ($20,000,000) as a custodian for such portfolio to be held under terms similar to those of this Agreement, provided, however, that Provident shall not be required to make any such delivery or payment until full payment shall have been made by such portfolio of the Fund of all liabilities constituting a charge on or against the properties of such portfolio of the Fund then held by Provident or on or against Provident and until full payment shall have been made to Provident of all of its fees, compensation, costs and expenses.
26. Notices. All notices and other communications, including Written Instructions (collectively referred to as "Notice" or "Notices" in this paragraph), hereunder shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notices shall be addressed (a) if to Provident at 17th and Chestnut Streets, Philadelphia, Pennsylvania 19103,
marked for the attention of the Custodian Services Department (or its successor); (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 and the address of the addressee thereof are, at the time of sending, more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given five days after it is sent, or if sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately, and, if the location of the sender of a Notice and the address of the addressee thereof are, at the time of sending, not more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given three days after it is sent, or if 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. All postage, cable, telegram, telex and facsimile sending device charges arising from the sending of a Notice hereunder shall be paid by the sender.
27. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
28. 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.
29. Delegation. On thirty (30) days prior written notice to the Fund, Provident may assign its rights and delegate its duties hereunder to any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC Financial Corp. provided that (i) the delegate agrees with Provident to comply with all relevant provisions of the 1940 Act; and (ii) Provident and such delegate shall promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation, including (without limitation) the capabilities of the delegate. Upon such assignment and delegation, Provident shall be relieved of any further duties or obligations hereunder and from any liability for any acts or failures to act occurring thereafter.
30. 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.
31. Miscellaneous. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties hereto may embody in one or more separate documents their agreement, if any, with respect to delegated and/or Oral Instructions. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written.
[SEAL] THE RBB FUND, INC.
Attest: _____________ By /s/Joe McKee Thomson
--------------------
Joe McKee Thomson
[SEAL] PROVIDENT NATIONAL BANK
Attest: _____________ By /s/John W. McGlaghlan
---------------------
John W. McGlaghlan
|
APPENDIX A Authorized Persons (name) (signature) (name) (signature) |
(name) (signature)
(name) (signature)
(name) (signature)
(name) (signature)
(name) (signature)
Exhibit 8(b)
SUB-CUSTODIAN AGREEMENT
AGREEMENT dated as of July 13, 1992 among THE CHASE MANHATTAN BANK, N.A.
("Bank"), THE RBB FUND, INC. (the "Fund") and PROVIDENT NATIONAL BANK
("Company").
WITNESSETH:
WHEREAS, Company has entered into a Custodian Agreement with the Fund, a Maryland corporation, to provide certain custody services; and
WHEREAS, the Company and the Fund wish to retain Bank to provide certain sub-custodian services to the Company and the Fund for the benefit of the Fund, and Bank 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. Custody Account. The Bank agrees to establish and maintain (a) a separate custody account for each investment portfolio of the Fund ("Custody Account") for any and all stocks, shares, bonds, debentures, notes, mortgages or other obligations for the payment of money and any certificates, receipts, warrants or other instruments representing rights to receive, purchase or subscribe for the same or evidencing or representing any other rights or interests therein and other similar property (hereinafter called "Securities") from time to time received by the Bank or any sub-custodian (as defined in the second paragraph of Section 3 hereof) for the account of the particular investment portfolio of the Fund; and (b) a separate deposit account or accounts in the name of each investment portfolio of the Fund ("Deposit Account") for any and all cash and cash equivalents in any currency received by the Bank or any sub-custodian for the account of the particular investment portfolio of the Fund, which cash shall not be subject to withdrawal by draft or check. The term "Property" as used herein shall mean all Securities, cash, cash equivalents and other assets of the Fund.
2. Maintenance of Property Abroad. Securities in a Custody Account shall be held in the country or other jurisdiction as shall be specified from time to time in Instructions (as defined in Section 9 hereof), provided that such country or other jurisdiction shall be one in which the principal trading market for such Securities is located or the country or other jurisdiction in which such securities are to be presented for payment or are acquired for the Custody Account, and cash in a Deposit Account shall be credited to an account in such country or other jurisdiction in which such cash may be legally deposited or is the legal currency for the payment of public or private debts. Cash may be held pursuant to Instructions in either interest or non-interest bearing accounts as may be available for the particular currency. To the extent Instructions are issued and the Bank can comply with such Instructions, the Bank is authorized to maintain cash balances on deposit for the Fund with itself or one of its affiliates at such reasonable rates of interest as may from time to time be paid on such accounts, or in non-interest bearing accounts as the Fund may direct, if acceptable to the Bank.
3. Eligible Foreign Custodians and Securities Depositories. The Board of
Directors of the Fund authorizes the Bank to hold the securities in the Custody
Account(s) and the cash in the Deposit Account(s) in custody and deposit
accounts, respectively, which have been established by the Bank with one of its
branches, a branch of a qualified U.S. bank, an eligible foreign custodian or
an eligible foreign securities depository; provided, however, that the Board of
Directors of the Fund has approved the use of, and the Bank's contract with,
such eligible foreign custodian or eligible foreign securities depository by
resolution, and Instructions to such effect have been provided to the Bank.
Furthermore, if a Bank's branch, a branch of a qualified U.S. bank or an
eligible foreign custodian is selected to act as the Bank's sub-custodian to
hold any Property, such entity is authorized to hold such Property in its
account with any eligible foreign securities depository in which it
participates so long as such foreign securities depository has been approved by
the Board of Directors of the Fund. For purposes of this Agreement (a)
"qualified U.S. bank" shall mean a qualified U.S. bank as defined in Rule 17f-5
under the Investment Company Act of 1940, as amended ("Rule 17f-5"); (b)
"eligible foreign custodian" shall mean (i) a banking institution or trust
company incorporated or organized under the laws of a country other than the
United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereto) or (ii) a
majority-owned direct or indirect subsidiary of a qualified U.S. bank or bank
holding company that is incorporated or organized under the laws of a country
other than the United States and that has shareholders' equity in excess of
$100 million in U.S. currency (or a foreign currency equivalent thereto); and
(c) "eligible foreign securities depository" shall mean a securities depository
or clearing agency, incorporated or organized under the laws of a country other
than the United States, which operates (i) the central system for handling of
securities or equivalent book-entries in that country or (ii) a transnational
system for the central handling of securities or equivalent book-entries.
Hereinafter the term "sub-custodian" will refer to any Bank branch, any branch of a qualified U.S. bank, any eligible foreign custodian or any eligible foreign securities depository with which the Bank has entered into an agreement of the type contemplated hereunder regarding Securities and/or cash held in or to be acquired for a Custody Account or a Deposit Account.
If, after the initial approval of the sub-custodians by the Board of Directors of the Fund in connection with this Agreement, the Bank wishes to appoint other sub-custodians to hold the Fund's Property, it will so notify the Company and the Fund and will provide them with information reasonably necessary to determine any such new sub-custodian's eligibility under Rule 17f-5, including a copy of the proposed agreement with such sub-custodian. The Fund shall within 30 days after receipt of such notice give a written approval or disapproval of the proposed action.
If the Bank intends to remove any sub-custodian previously approved, it shall so notify the Fund and the Company and shall move the Property deposited with such, sub-custodian to another sub-custodian previously approved or to a new sub-custodian, provided that the appointment of any new sub-custodian will be subject to the requirements set forth in the preceding paragraph. The Bank shall take steps as may be required to remove any sub-custodian which has ceased to meet the requirements of Rule 17f-5.
4. Use of Sub-Custodians. With respect to Property which is maintained by the Bank in the physical custody of a sub-custodian pursuant to Section 3:
(a) The Bank will identify on its books as belonging to the particular investment portfolio of the Fund any Property held by such sub-custodian.
(b) In the event that a sub-custodian permits any of the Securities placed in its care to be held in an eligible foreign securities depository, such sub-custodian will be required by its agreement with the Bank to identify on its books such Securities as being held for the account of the Bank as a custodian for its customers.
(c) Any Securities in a Custody Account held by a sub-custodian of the Bank will be subject only to the instructions of the Bank or its agents; and any Securities held in an eligible foreign securities depository for the account of a sub-custodian will be subject only to the instructions of such sub-custodian.
(d) The Bank will only deposit Securities in an account with a sub-custodian which includes exclusively the assets held by the Bank for its customers, and the Bank will cause such account to be designated by such sub-custodian as a special custody account for the exclusive benefit of customers of the Bank.
(e) Any agreement the' Bank shall enter into with a sub-custodian with respect to the holding of Securities shall require that (i) the Securities are not subject to any right, charge, security interest, lien or claim of any kind in favor of such sub-custodian or its creditors except for a claim of payment for its safe custody or administration and (ii) beneficial ownership of such Securities is freely transferable without the payment of money or value other than for safe custody or administration; provided, however, that the foregoing shall not apply to the extent that any of the above-mentioned rights, charges, etc. result from any compensation or other expenses arising with respect to the safekeeping of Securities pursuant to such agreement.
(f) The Bank shall allow independent public accountants of the Fund such reasonable access to the records of the Bank relating to Property held in a Custody Account and a Deposit Account as required by such accountants in connection with their examination of the books and records pertaining to the affairs of the Fund. The Bank shall, subject to restrictions under applicable law, also obtain from any sub-custodian with which the Bank maintains the physical possession of any Property an undertaking to permit independent public accountants of the Fund such reasonable access to the records of such sub-custodian as may be required in connection with their examination of the books and records pertaining to the affairs of the Fund or to supply a verifiable confirmation of the contents of such records. The Bank shall furnish the Fund and the Company such reports (or portions thereof) of the Bank's external auditors as relate directly to the Bank's system of internal accounting controls applicable to the Bank's duties under this Agreement.
(g) The Bank will supply to the Fund, care of its investment adviser, and the Company at least monthly a statement in respect to any Property in a Custody and a Deposit Account held by each sub-custodian, including an identification of the entity having possession of such Property, and the Bank will send to the Fund and the Company an advice or notification of any transfers of Property to or from the Custody Account and Deposit Account, indicating, as to Property acquired for an investment portfolio of the Fund, the identity of the entity having physical possession of such Property. In the absence of the filing in writing with the Bank by the Fund of exceptions or objections to any such statement within sixty (60) days of the Fund's receipt of such statement, or within sixty (60) days after the date that a material defect is reasonably discoverable, the Fund shall be deemed to have approved such statement; and in such case or upon written approval of the Fund of any such statement the Bank shall, to the extent permitted by law and provided the Bank has met the standard of care in Section 12 hereof, be released, relieved and discharged with respect to all matters and things set forth in such statement as though such statement has been settled by the decree of a court of competent jurisdiction in an action in which the Fund and all persons having any equity interest in the Fund were parties.
(h) The Bank hereby warrants to the Fund and the Company that in its opinion, after due inquiry, the established procedures to be followed by each of its branches, each branch of a qualified U.S. bank, each eligible foreign custodian and each eligible foreign securities depository holding Securities of the Fund pursuant to this Agreement afford protection for such Securities at least equal to that afforded by the Bank's established procedures with respect to similar Securities held by the Bank (and its securities depositories) in New York.
(i) The Bank hereby warrants to the Fund and the Company that as of the date of this Agreement it is maintaining a Bankers Blanket Bond and hereby agrees to notify the Fund and the Company in the event its Bankers Blanket Bond is cancelled or otherwise lapses.
5. Deposit Account Payments. Subject to the provisions of Section 7, the Bank shall make, or cause its sub-custodian to make, payments of cash credited to a Deposit Account only:
(a) in connection with the purchase of Securities for the
particular investment portfolio of the Fund involved and the delivery of such
Securities to, or the crediting of such Securities to the particular Custody
Account of, the Bank or its sub-custodian, each such payment to be made at
prices as confirmed by Instructions from Authorized Persons (as defined in
Section 10 hereof);
(b) for the purchase or redemption of shares of the capital stock of the particular investment portfolio of the Fund involved and the delivery to, or crediting to the account of, the Bank or its sub-custodian of such shares to be so purchased or redeemed;
(c) for the payment for the account of the particular investment portfolio of the Fund involved of dividends, interest, taxes, management or supervisory fees, capital distributions or operating expenses;
(d) for the payments to be made in connection with the conversion, exchange or surrender of Securities held in a Custody Account;
(e) for other proper corporate purposes of the particular investment portfolio of the Fund involved; or
(f) upon the termination of this Custody Agreement as hereinafter set forth.
All payments of cash for a purpose permitted by subsection (a), (b), (c) or (d)
of this Section 5 will be made only upon receipt by the Bank of Instructions
from Authorized Persons which shall specify the purpose for which the payment
is to be made and the applicable subsection of this Section 5. In the case of
any payment to be made for the purpose permitted by subsection (e) of this
Section 5, the Bank must first receive a certified copy of a resolution of the
Board of Directors of the Fund adequately describing such payment, declaring
such purpose to be a proper corporate purpose, and naming the person or persons
to whom such payment shall be made. Any payment pursuant to subsection (f) of
this Section 5 will be made in accordance with Section 17 hereof.
In the event that any payment for an investment portfolio of the Fund made under this Section 5 exceeds the funds available in that investment portfolio's Deposit Account, the Bank may, in its discretion, advance the Fund on behalf of that investment portfolio an amount equal to such excess and such advance shall be deemed a loan from the Bank to that investment portfolio payable on demand, bearing interest at the rate of interest customarily charged by the Bank on similar loans. If the Bank causes a Deposit Account to be credited on the payable date for interest, dividends or redemptions, the particular investment portfolio of the Fund involved will promptly return to the Bank any such amount or property so credited upon oral or written notification that neither the Bank nor its sub-custodian can collect such amount or property in the ordinary course of business. The Bank or its sub-custodian, as the case may be, shall have no duty or obligation to institute legal proceedings, file a claim or proof of claim in any insolvency proceeding or take any other action with respect to the collection of such amount or property beyond its ordinary collection procedures.
6. Custody Account Transactions. Subject to the provisions of Section 7, Securities in a Custody Account will be transferred, exchanged or delivered by the Bank or its sub-custodians only:
(a) upon sale of such, Securities for the particular investment portfolio of the Fund involved and receipt by the Bank or its sub-custodian of payment therefor, each such payment to be in the amount confirmed by Instructions from Authorized Persons;
(b) when such Securities' are called, redeemed or retired, or otherwise become payable;
(c) in exchange for or upon conversion into other securities alone or other Securities and cash pursuant to any plan of merger, consolidation, reorganization, recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to their terms into other Securities;
(e) upon exercise of subscription, purchase or other similar rights represented by such Securities;
(f) for the purpose of exchanging interim receipts or temporary Securities for definitive Securities;
(g) for the purpose of redeeming in kind shares of the capital stock of the particular investment portfolio of the Fund involved against delivery to the Bank or its sub-custodian of such shares to be redeemed;
(h) for other proper corporate purposes of the particular investment portfolio of the Fund involved; or
(i) upon the termination of this Custody Agreement as hereinafter set forth. All
transfers, exchanges or deliveries of Securities in a Custody Account for a
purpose permitted by either subsection (a), (b), (c), (d), (e) or (f) of this
Section 6 will be made, except as provided in Section 8 hereof, only upon
receipt by the Bank of Instructions from Authorized Persons which shall specify
the purpose of the transfer, exchange or delivery to be made and the applicable
subsection of this Section 6. In the case of any transfer or delivery to be made
for the purpose permitted by subsection (g) of this Section 6, the Bank must
first receive Instructions from Authorized Persons specifying the shares held by
the Bank or its sub-custodian to be so transferred or delivered and naming the
person or persons to whom transfers or delivery of such shares shall be made. In
the case of any transfer, exchange or delivery to be made for the purpose
permitted by subsection (h) of this Section 6, the Bank must first receive a
certified copy of a resolution of the Board of Directors of the Fund adequately
describing such transfer, exchange or delivery, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom delivery of
such Securities shall be made. Any transfer or delivery pursuant to subsection
(i) of this Section 6 will be made in accordance with Section 17 hereof.
7. Custody Account Procedures. With respect to any transaction involving Securities held in or to be acquired for a Custody Account, the Bank in its discretion may cause the Deposit Account for the particular investment portfolio of the Fund involved to be credited on the contractual settlement date with the proceeds of any sale or exchange of Securities from the particular Custody Account and to be debited on the contractual settlement date for the cost of Securities, purchased or acquired for the particular Custody Account. The Bank may reverse any such credit or debit if the transaction with respect to which such credit or debit was made fails to settle within a reasonable period, determined by the Bank in its discretion, after the contractual settlement date, except that if any Securities delivered pursuant to this Section 7 are returned by the recipient thereof, the Bank may cause any such credits and debits to be reversed at any time. With respect to any transactions as to which the Bank does not determine so to credit or debit the particular Deposit Account, the proceeds from the sale or exchange of Securities will be credited and the cost of such Securities purchased or acquired will be debited to the particular Deposit Account on the date such proceeds or Securities are received by the Bank.
Notwithstanding the preceding paragraph, settlement and payment for Securities received for, and delivery of Securities out of, a Custody Account may be effected in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering Securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such Securities from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives Instructions from Authorized Persons to the contrary, the Bank will, or will instruct its sub-custodian, to:
(a) present for payment any securities in a Custody Account which are called, redeemed or retired or otherwise become payable and all coupons and other income items which call for payment upon presentation to the extent that the Bank or sub-custodian is aware of such opportunities for or payment, and hold cash received upon presentation of such Securities in accordance with the provisions of Sections 2, 3 and 4 hereof;
(b) in respect of Securities in a Custody Account, execute in the name of the Fund on behalf of the particular investment portfolio involved such ownership and other certificates as may be required to obtain payments in respect thereof;
(c) exchange interim receipts or temporary Securities in a Custody Account for definitive Securities;
(d) (if applicable) convert monies received with respect to Securities of foreign issue into United States dollars or any other currency necessary to effect any transaction involving the Securities whenever it is practicable to do so through customary banking channels, using any method or agency available, including, but not limited to, the facilities of the Bank, its subsidiaries, affiliates or sub-custodians;
(e) (if applicable) appoint brokers and agents for any transaction involving the Securities in a Custody Account, including, without limitation, affiliates of the Bank or any sub-custodian; and
(f) reclaim taxes withheld by foreign issuers where reclaim is possible, provided that, Bank has been provided with all documentation it may require.
9. Instructions. As used in this Agreement, the term "Instructions" means instructions of the Fund or the Company received by the Bank via telephone, telex, TWX, facsimile transmission, bank wire or other teleprocess or electronic instruction system acceptable to the Bank which the Bank believes in good faith to have been given by Authorized Persons or which are transmitted with proper testing or authentication pursuant to terms and conditions which the Bank may specify.
Any Instructions delivered to the Bank by telephone shall promptly thereafter be confirmed in writing by an Authorized Person (which confirmation may bear the facsimile signature of such Person), but the particular investment portfolio of the Fund involved and the Company will hold the Bank harmless for the Company's or the Fund's (i) failure to send such confirmation in writing, or (ii) the failure of such confirmation to conform to the telephone Instructions received. Unless otherwise expressly provided, all Instructions shall continue in full force and effect until cancelled or superseded. If the Bank requires test arrangements, authentication methods or other security devices to be used with respect to Instructions, any Instructions given by the Fund or the Company thereafter shall be given and processed in accordance with such terms and conditions for the use of such arrangements, methods or devices as the Bank may put into effect and modify from time to time. The Fund and the Company shall safeguard any testkeys, identification codes or other security devices which the Bank shall make available to them. The Bank may electronically record any Instructions given by telephone, and any other telephone discussions, with respect to a Custody Account.
10. Authorized Persons. As used in this Agreement, the term "Authorized Persons" means such officers or such agents of the Fund or the Company as have been designated by a resolution of the Board of Directors of the Fund, a certified copy of which has been provided to the Bank, to act on behalf of the Fund in the performance of any acts which Authorized Persons may do under this Agreement. Such persons shall continue to be Authorized Persons until such time as the Bank receives Instructions from Authorized Persons that any such officer or agent is no longer an Authorized Person.
11. Nominees. Securities in a Custody Account which are ordinarily held in registered form may be registered in the name of the Bank's nominee or, as to any Securities in the possession of an entity other than the Bank, in the name of such entity's nominee. The particular investment portfolio of the Fund involved agrees to hold any such nominee harmless from any liability as a holder of record of such Securities, but not if such liability is a result of such nominee's negligence. The Bank may without notice to the Company or the Fund cause any such Securities to cease to be registered in the name of any such nominee and to be registered in the name of the Fund.
In the event that any Securities registered in the name of the Bank's nominee or held by one of its sub-custodians and registered in the name of such sub-custodian's nominee are called for partial redemption by the issuer of such Security, the Bank may allot, or cause, to be allotted, the called portion to the respective beneficial holders of such class of security in any manner the Bank deems to be fair and equitable.
12. Standard of Care.
(a) The Bank shall be obligated to perform only such duties as are set forth in this Agreement or expressly contained in instructions given to Bank which are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its obligations under this Agreement and the safekeeping of Property. The Bank shall be liable to the Fund and the Company for any loss which shall occur as the result of the failure of a sub-custodian or an eligible foreign securities depository to exercise reasonable care with respect to the safekeeping of such Property to the same extent that the Bank would be liable to the Fund and the Company if the Bank were holding such Property in New York. In the event of any loss to the Fund or the Company by reason of the failure of the Bank or its subcustodian or an eligible foreign securities depository to exercise reasonable care, the Bank shall be liable to the Fund or the Company only to the extent of the Fund's or Company's direct damages and expenses to be determined based on, but not limited to, the market value of the Property which is the subject of the loss at the date of discovery of such loss and without reference to any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default or for the solvency of any broker or agent (other than as provided herein) which it or a sub-custodian appoints and uses unless such appointment and use were made or done negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without Liability to the particular investment portfolio of the Fund involved and the Company for any action taken or omitted fitted by the Bank whether pursuant to Instructions or otherwise within the scope of this Agreement if such act or omission was in good faith and without negligence. In performing its obligations under this Agreement, the Bank may rely on the genuineness of any document which it believes in good faith and without negligence to have been validly executed.
(iv) The Fund, on behalf of the particular investment portfolio of the Fund involved, agrees to cause such investment portfolio to pay for and hold the Bank harmless from any liability or loss resulting from the imposition or assessment of any taxes or other governmental charges, and any related expenses with respect to income from or Property in such investment portfolio's Custody Account and Deposit Account.
(v) The Bank shall be entitled to rely, and may act upon the advice of counsel (who may be counsel for the Fund or the Company) on all matters and shall be without liability for any action reasonably taken or omitted in good faith and without negligence pursuant to such advice.
(vi) The Bank need not maintain any insurance for the exclusive benefit of the Fund or Company.
(vii) Without limiting the foregoing, the Bank shall not be liable for any loss which results from:
1) the general risk of investing, or
2) subject to Section 12(a)(i) hereof, investing or holding Property in a particular country including, but not limited to, losses resulting from nationalization, expropriation or other governmental actions; regulation of the banking or securities industry; currency restrictions, devaluations or fluctuations; and market conditions which prevent the orderly execution of securities transactions or affect the value of Property.
(viii) No party shall be liable to the other for any loss due to forces beyond its control including but not limited to strikes or work stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this Section 12, it is specifically acknowledged that the Bank shall have no duty or responsibility to:
(i) Question Instructions or make any suggestions to the Fund, Company or an Authorized Person regarding such Instructions;
(ii) Supervise or make recommendations with respect to investments or the retention of Securities;
(iii) Subject to Section 12(a)(ii) hereof, evaluate or report to the Fund,
Company or an Authorized Person regarding the financial condition of any broker,
agent or other party to which Securities are delivered or payments are made
pursuant to this Agreement; or
(iv) Review or reconcile trade confirmations received from brokers.
(c) Bank shall provide to the Fund, on an annual basis, a report confirming that the arrangements hereunder remain in compliance with the rules of the Securities and Exchange commission governing such arrangements.
13. Compliance with Securities and Exchange Commission Rules and Orders. Except to the extent the Bank has specifically agreed pursuant to this Agreement or in an exemptive order to comply with a condition of Rule 17f-5 or any interpretation or exemptive order promulgated thereunder by or under the authority of the Securities and Exchange Commission, the Fund shall be solely responsible to assure that the maintenance of Securities and cash under this Agreement complies with such Rule 17f-5.
14. Corporate Action. Whenever the Bank or its sub-custodian receives information concerning the Securities which requires discretionary action by the beneficial owner of the Securities (other than a proxy), such as subscription rights, bonus issues, stock repurchase plans and rights offerings, or legal notices or other material intended to be transmitted to securities holders ("Corporate Actions"), the Bank will give the Company notice of such Corporate Actions to the extent that the Bank's central corporate actions department has actual knowledge of a Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights issue, stock dividend, stock split or similar Corporate Action is received which bears an expiration date, the Bank or its sub-custodians will endeavor to obtain Instructions from the Fund, Company or its Authorized Person, but if Instructions are not received in time for the Bank to take timely action, or actual notice of such Corporate Action was received too late to seek Instructions, the Bank is authorized to sell such rights entitlement or fractional interest and to credit the applicable Deposit Account with the proceeds and to take any other action it deems, in good faith, to be appropriate in which case, provided it has met the standard of care in Section 12 hereof, it shall be held harmless by the particular investment portfolio of the Fund involved for any such action.
The Bank will deliver proxies to the Company or its designated agent pursuant to special arrangements which may have been agreed to in writing between the parties hereto. Such proxies shall be executed in the appropriate nominee name relating to Securities in a Custody Account registered in the name of such nominee but without indicating the manner in which such proxies are to be voted; and where bearer Securities are involved, proxies will be delivered in accordance with instructions from Authorized Persons.
15. Fees and Expenses. The Fund agrees to pay to the Bank from time to time such compensation for its services pursuant to this Agreement as may be mutually agreed upon in writing from time to time and the Bank's out-of-pocket or incidental expenses, including (but without limitation) reasonable legal fees. The Fund hereby agrees on behalf of its respective investment portfolios to cause the particular investment portfolio of the Fund involved to hold the Bank harmless from any liability or loss resulting from any taxes or other governmental charges, and any expenses related thereto, which may be imposed, or assessed with respect to such investment portfolio's Custody Account and also agrees on behalf of its respective investment portfolios to cause the particular investment portfolio of the Fund involved to hold the Bank, its sub-custodians, and their respective nominees harmless from any liability as a record holder of Securities in such investment portfolio's Custody Account. The Bank is authorized to charge any account of the particular investment portfolio of the Fund involved for such items and the Bank shall have a lien on Securities in such investment portfolio's Custody Account and on cash in such investment portfolio's Deposit Account for any amount owing to the Bank in connection with such investment portfolio from time to time under this Agreement.
16. Effectiveness. This Agreement shall be effective on the date first noted above.
17. Termination. This Agreement may be terminated by the Fund, the Company or the Bank by 60 days' written notice to the other, sent by registered mail, provided that any termination by the Company shall be authorized by a resolution of the Board of Directors of the Fund, a certified copy of which shall accompany such notice of termination, and provided further, that such resolution shall specify the names of persons to whom the Bank shall deliver the Securities in each Custody Account and to whom the cash in each Deposit Account shall be paid. If notice of termination is given by the Bank, the Fund or the Company shall, within 60 days following the giving of such notice, deliver to the Bank a certified copy of a resolution of the Board of Directors of the Fund specifying the names of the persons to whom the Bank shall deliver such Securities and cash, after deducting therefrom any amounts which the Bank determines to be owed to it under Section 15 hereof. If within 60 days following the giving of a notice of termination by the Bank, the Bank does not receive from the Fund or the Company a certified copy of a resolution of the Board of Directors of the Fund specifying the names of the persons to whom the cash in each Deposit Account shall be paid and to whom the Securities in each Custody Account shall be delivered, the Bank, at its election, may deliver such Securities and pay such cash to a bank or trust company doing business in the State of New York and qualified as a custodian under the Investment Company Act of 1940 to be held and disposed of pursuant to the provisions of this Agreement, or to Authorized Persons, or, may continue to hold such Securities and cash until a certified copy of one or more resolutions as aforesaid is delivered to the Bank. The obligations of the parties hereto regarding the use of reasonable care, indemnities and payment of fees and expenses shall survive the termination of this Agreement, and the obligations of each investment portfolio of the Fund to indemnify and/or hold harmless other persons or entities under this Agreement shall be the several (and not the joint or joint and several) obligation of each investment portfolio of the Fund.
18. Notices. Any notice or other communication from the Fund or the Company to the Bank is to be sent to the office of the Bank at 1211 Avenue of the Americas (33rd floor), New York, New York, 10036, Attention: Global Custody Division, or such other address as may hereafter be given to the Fund or the Company in accordance with the notice provisions hereunder, and any notice from the Bank to the Fund or the Company is to be mailed postage prepaid, addressed to the Fund and to the Company at the addresses appearing below, or as the same may hereafter be changed on the Bank's records in accordance with notice hereunder from the Fund or the Company.
19. Governing Law and Successors and Assigns. This Agreement shall be governed by the law of the State of New York and shall not be assignable by any party, but shall bind the successors and assigns of the Fund, the Company and the Bank.
20. Headings. The headings of the paragraphs hereof are included for convenience of reference only and do not form a part of this Agreement.
21. Counterpart Execution. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All counterparts shall be construed together and shall constitute one agreement.
22. Confidentiality. Bank agrees on behalf of itself and its employees to treat confidentially all records and other information relative to the Fund and its prior, present, or potential shareholders, and relative to the Company and its prior, present, or potential customers, except, after prior notification to and approval in writing by the Fund or the Company, which approval shall not be unreasonably withheld and may not be withheld where Bank 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 or the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written.
PROVIDENT NATIONAL BANK
Airport Business Center 200 Stevens Drive Lester, PA 19111
THE CHASE MANHATTAN BANK, N.A.
1211 Avenue of the Americas New York, NY 10036
THE RBB FUND, INC.
By: /s/Edward J. Roach
____________________
Edward J. Roach
|
Address for record:
Bellevue Park Corporate Center 103 Bellevue Parkway Wilmington, DE 19809
Exhibit 8(c)
AMENDMENT NO. 1 CUSTODIAN AGREEMENT
This Amendment, dated the 1st day of August 1991, is entered into between THE RBB FUND, INC. (the "Fund"), a Maryland corporation, and PROVIDENT NATIONAL BANK ("Provident"), a national banking association.
WHEREAS, the Fund and Provident have entered into a Custodian Agreement dated as of August 16, 1988, (the "Custodian Agreement"), pursuant to which the Fund appointed Provident to act as custodian for its investment portfolios; and
WHEREAS, the Fund's Board of Directors has approved this Amendment; and
WHEREAS, the Fund has established and will establish additional classes of Common Stock ("Shares"), with respect to which it wants to appoint Provident to act as custodian under the Custodian Agreement; and
WHEREAS, Provident has notified the Fund that it wants to serve as custodian for "Class O Shares", "Class P Shares" and "Class Q Shares" and for any classes of shares of common stock of the Fund hereafter created, classified or reclassified.
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Appointment. Paragraph 1 of the Custodian Agreement is amended and restated in full to read as follows;
The fund hereby appoints Provident to act as custodian of the securities, cash and other property belonging to each investment portfolio (a "portfolio") of the Fund for the period and on the terms set forth in this Agreement. Provident accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Paragraph 21 of this Agreement. Provident agrees to comply with all relevant provisions of the 1940 Act and applicable rules and regulations thereunder. The Fund's Common Stock, $.001 par value (the "Shares") has been as of the date hereof classified into seventeen different classes of Common Stock: the "Class A Shares", the "Class B Shares", the "Class C Shares", the "Class D Shares", the "Class E Shares", the "Class F shares", the "Class G Shares", the "Class H Shares", the "Class I Shares", the "Class J Shares", the "Class K Shares", the "Class L Shares", the "Class M Shares", the "Class N Shares", the "Class O Shares", the "Class P Shares", and the "Class Q Shares", respectively. The Fund may from time to time issue additional series or classes of Shares or classify and reclassify shares of such series or class. Provident shall identify to each such series or class Property belonging to such series or class and in such reports, confirmations and notices to the Fund called for under this Agreement shall indentify the series or class to which such report, confirmation or notice pertains.
2. Capitalized Terms. From and after the date hereof, the following term as used in the Custodian Agreement shall be deemed to include also the meaning specified herein: "Shares" shall be deemed to include "Class O Shares", "Class P Shares" and "Class Q Shares" and shares of common stock hereafter created, classified or reclassified.
3. Miscellaneous. Except to the extent amended and supplemented hereby, the Custodian Agreement shall remain unchanged and in full force and effect and is hereby ratified and confirmed in all respects as amended and supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date and year first above written.
THE RBB FUND, INC.
(SEAL)
By: /s/Edward J. Roach
_____________________
Edward J. Roach
Title: President
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PROVIDENT NATIONAL BANK
Exhibit 8(d)
CUSTODIAN CONTRACT
Between
RBB FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
1. Employment of Custodian and Property to be Held By It .................................................1
2. Duties of the Custodian with Respect to Property of the
Fund Held by the Custodian in the United States ....2
2.1 Holding Securities..................................2
2.2 Delivery of Securities .............................2
2.3 Registration of Securities .........................5
2.4 Bank Accounts ......................................5
2.5 Collection of Income................................6
2.6 Payment of Fund Monies..............................6
2.7 Liability for Payment in Advance
Receipt of Securities Purchased.....................8
2.8 Appointment of Agents...............................8
2.9 Deposit of Fund Assets in Securities System.........8
2.10 Fund Assets Held in the Custodian's Direct
Paper System ..................................10
2.11 Segregated Account..
2.12 Ownership Certificates for Tax Purposes ...........11
2.13 Proxies ...........................................11
2.14 Communications Relating to Portfolio Securities....12
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States .............12
3.1 Appointment of Foreign Sub-Custodians .............12
3.2 Assets to be Held .................................12
3.3 Foreign Securities Depositories ...................13
3.4 Agreements with Foreign Banking Institutions.......13
3.5 Access of Independent Accountants of the Fund .....13
3.6 Reports by Custodian ..............................13
3.7 Transactions in Foreign Custody Account ...........14
3.8 Liability of Foreign Sub-Custodians ...............14
3.9 Liability of Custodian ............................15
3.10 Reimbursement for Advances ........................15
3.11 Monitoring Responsibilities .......................15
3.12 Branches of U.S. Banks ............................16
3.13 Tax Law ...........................................16
4. Proper Instructions.....................................16
5. Actions Permitted Without Express Authority ............17
6. Evidence of Authority ..................................17
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7. Duties of Custodian With Respect to the Books
of Account ............................................18
8. Records................................................18
9. Opinion of Fund's Independent Accountants..............18
10. Reports to Fund by Independent Public Accountants......19
11. Compensation of Custodian............................. 19
12. Responsibility of Custodian............................19
13. Effective Period, Termination and Amendment............20
14. Successor Custodian ...................................21
15. Interpretive and Additional Provisions ................22
16. Additional Funds ......................................23
17. Massachusetts Law to Apply ............................23
18. Prior Contracts .......................................23
19. Shareholder Communications.............................23
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CUSTODIAN CONTRACT
This Contract between RBB FUND, INC., a corporation organized and existing under the laws of the State of Maryland, having its principal place of business at Bellevue Corporate Center, 400 Bellevue Parkway, Suite 100, Wilmington, DE, 19809 hereinafter called the "Fund", and State Street Bank and Trust Company, a Massachusetts Trust Company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and
WHEREAS, the Fund desires to appoint the Custodian as custodian of the foreign assets of two such series, the Warburg Pincus Growth & Income Fund (Class A) and the Warburg Pincus Balanced Fund (Class C) (such series together with all other series subsequently established by the Fund and made subject to this Contract in accordance with paragraph 16, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of the Portfolios of the Fund which the Fund, on behalf of the applicable Portfolios, desires to be held in places outside the United States ("foreign securities") pursuant to the provisions of the Articles of Incorporation. The Fund and the Custodian agree that the Fund has appointed PNC Bank, N.A. as custodian of the assets of the Fund which the Fund, on behalf of the applicable Portfolios, desires to be held in places within the United States ("domestic securities"). Notwithstanding the foregoing, in the event that the Custodian shall at any time hold domestic securities on behalf of a Portfolio, the provisions of this Contract and, in particular Section 2 hereof, shall be applicable thereto. The parties agree that the Custodian will maintain domestic securities only for temporary or limited purposes related to its duties as custodian of the Portfolios' foreign securities. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian all securities and cash of the Portfolios which the Fund desires that the Custodian hold pursuant to this Contract, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time that the Fund desires the Custodian to, hold pursuant to this Contract. The Custodian shall not be responsible for any property of a Portfolio held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
4), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian may hold and physically segregate for the account of each Portfolio non-cash property to be held by it in the United States including domestic securities owned by such Portfolio, other than (a) securities which the Custodian maintains pursuant to Section 2.9 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury, collectively referred to herein as "Securities System" and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which the Custodian deposits and/or maintains in the Direct Paper System of the Custodian pursuant to Section 2.10.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.9 hereof;
4) To the depository agent in connection with tender or other similar offers for such securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.8 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement with respect to such securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities held by the Custodian hereunder, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of such securities made by the Portfolio, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund on behalf of the Portfolio, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral;
11) For delivery of securities maintained by Custodian hereunder as security in connection with any borrowings by the Fund on behalf of the Portfolio requiring a pledge of assets by the Fund on behalf of the Portfolio, but only against receipt of amounts borrowed;
12) For delivery of securities maintained by Custodian hereunder in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio of the Fund;
13) For delivery of securities maintained by Custodian hereunder in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Porfolio of the Fund;
14) For delivery to another custodian of the Portfolio as necessary to effect transactions as authorized by Proper Instructions;
15) For any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions from the Fund on behalf of the applicable Portfolio, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, specifying the securities of the Portfolio to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing to the Custodian the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.8 or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board of Directors of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.
2.5 Collection of Income. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to such Portfolio's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled.
2.6 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio maintained hereunder in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.9 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.10; (d) in the case of repurchase agreements entered into between the Fund on behalf of the Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Section 4;
2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;
4) For payment of the amount of dividends received in respect of securities sold short;
5) For delivery to another custodian of the Portfolio as necessary to effect transactions as authorized by Proper Instructions;
6) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions from the Fund on behalf of the Portfolio, a certified copy of a resolution of the Board of Directors or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made.
2.7 Liability for Payment in Advance of Receipt of Securities Purchased. Except as specifically stated otherwise in this Contract, in any and every case where payment for purchase of domestic securities for the account of a Portfolio is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund on behalf of such Portfolio to so pay in advance, the Custodian shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by the Custodian.
2.8 Appointment of Agents. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; provided, however, the Custodian shall obtain the prior written consent of the Fund to such appointment and that the appointment of any such agent shall not relieve the Custodian of its responsibilities or liabilities hereunder.
2.9 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Portfolio to be maintained hereunder in a Securities System provided that such securities are represented in an account ("Account") of the Custodian in the Securities System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to such securities of the Portfolio which are maintained in a Securities System shall identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of the Portfolio to be maintained hereunder upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio and maintained hereunder upon (i) receipt of advice from the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Portfolio. Copies of all advices from the Securities System of transfers of securities for the account of the Portfolio shall identify the Portfolio, be maintained for the Portfolio by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio in the form of a written advice or notice and shall furnish to the Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any report obtained by the Custodian on the Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the Portfolio the initial or annual certificate, as the case may be, required by Article 13 hereof;
6) Anything to the contrary in this Contract notwithstanding, the Custodian shall be liable to the Fund for the benefit of the Portfolio for any loss or damage to the Portfolio resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Portfolio has not been made whole for any such loss or damage.
2.10 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may deposit and/or maintain securities owned by a Portfolio in the Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio to be maintained hereunder in the Direct Paper System only if such securities are represented in an account ("Account") of the Custodian in the Direct Paper System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to such securities of the Portfolio which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of the Portfolio to be maintained hereunder upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio and maintained hereunder upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets reflecting
each day's transaction in the Direct Paper System for the account of
the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as the
Fund may reasonably request from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities held by the Custodian hereunder,
including securities maintained in an account by the Custodian
pursuant to Section 2.9 hereof, (i) in accordance with the provisions
of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Portfolio, (ii) for purposes of
segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii)
for the purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction with respect to securities held by the
Custodian hereunder, the Portfolio shall notify the Custodian at least
three business days prior to the date on which the Custodian is to take
such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
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3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and instructs the Custodian to employ as sub-custodians for the Portfolios, securities and other assets maintained outside the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as defined in Section 4 of this Contract, together with a certified resolution of the Fund's Board of Directors, the Custodian and the Fund may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct the Custodian to cease the employment of any one or more such sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other assets maintained in the custody of the foreign sub-custodians to: (a) "foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, and (b) cash and cash equivalents in such amounts as the Custodian or the Fund may determine to be reasonably necessary to effect the Portfolio's foreign securities transactions. The Custodian shall identify on its books as belonging to the Fund, the foreign securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon in writing by the Custodian and the Fund, assets of the Portfolios shall be maintained in foreign securities depositories only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof. Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
each Portfolio will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the
assets of each Portfolio will be freely transferable without the
payment of money or value other than for custody or administration;
(c) adequate records will be maintained identifying the assets as
belonging to each applicable Portfolio; (d) officers of or auditors
employed by, or other representatives of the Custodian, including to
the extent permitted under applicable law the independent public
accountants for the Fund, will be given access to the books and
records of the foreign banking institution relating to its actions
under its agreement with the Custodian; and (e) assets of the
Portfolios held by the foreign sub-custodian will be subject only to
the instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the Fund, the Custodian will use its best efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of the Portfolio(s) held by foreign sub-custodians, including but not limited to an identification of entities having possession of the Portfolio(s) securities and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of each applicable Portfolio indicating, as to securities acquired for a Portfolio, the identity of the entity having physical possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise provided in paragraph (b) of this Section 3.7, the provision of Sections 2.2, 2.5, 2.6, 2.7, 2.12, 2.13, 2.14 of this Contract shall apply, mutatis mutandis to the foreign securities of the Fund held outside the United States by foreign sub-custodians. (b) Notwithstanding any provision of this Contract to the contrary, settlement and payment for securities received for the account of each applicable Portfolio and delivery of securities maintained for the account of each applicable Portfolio may be effected in accordance with the customary established securities trading or securities processing practices and procedure in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. (c) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub-custodian shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and each Fund from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the institution's performance of such obligations. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a foreign banking institution as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time maintained by the Custodian hereunder for the
account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of such
Portfolios assets to the extent necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that
its shareholders, equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2 (a) (5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract. (b)
Cash held for each Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
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3.13 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of America
or any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
4. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of
Directors shall have from time to time authorized to provide
instructions with respect to this Contract. Each such writing shall
set forth the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if
the Custodian reasonably believes them to have been given by a person
authorized by the Board of Directors to give such instructions under
this Contract with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt
of a certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors of the Fund accompanied by a
detailed description of procedures approved by the Board of Directors
with respect to this Contract, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board of Directors and the
Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section,
Proper Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.11.
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5. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority fromthe Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that all such payments shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities maintained hereunder in temporary form for securities in definitive form;
3) endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio maintained
hereunder except as otherwise directed by the Board of Directors of
the Fund.
6. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Directors of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Directors pursuant to the Articles of Incorporation as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.
7. Duties of Custodian with Respect to the Books of Account
The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Directors of the Fund to keep the books of account of each Portfolio and compute the net asset value per share of the outstanding shares of each Portfolio.
8. Records
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the Fund under
the Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such
records shall be the property of the Fund and shall at all times
during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the
Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the
Fund with a tabulation of securities owned by each Portfolio and held
by the Custodian and shall, when requested to do so by the Fund and
for such compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.
9. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of each applicable Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission.
10. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the Portfolios at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund on behalf of each applicable Portfolio and the Custodian.
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign banking institution appointed pursuant to the provisions of Article 3 to the same extent as set forth in Article 1 hereof with respect to sub-custodians located in the United States (except as specifically provided in Article 3.9) and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from, or caused by, the direction of or authorization by the Fund to maintain custody of any securities or cash of the Fund in a foreign country including, but not limited to, losses resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, the Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) for the benefit of a Portfolio including the purchase or sale of foreign exchange or of contracts for foreign exchange or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time maintained by the Custodian for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolio's assets to the extent necessary to obtain reimbursement.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided, however that the Custodian shall not with respect to a Portfolio act under Section 2.9 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors of the Fund has approved the initial use of a particular Securities System by such Portfolio, as required by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors has approved the initial use of the Direct Paper System by such Portfolio; provided further, however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Articles of Incorporation; and Provided further, that the Fund on behalf of one or more of the Portfolios may at any time by action of its Board of Directors (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable Portfolio shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements.
14. Successor Custodian
If a successor custodian for the Custodian with respect to the Fund or of one or more of the Portfolios shall be appointed by the Board of Directors of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Directors of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Directors shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Portfolio and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Directors to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Articles of Incorporation of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract.
16. Additional Portfolios
In the event that the Fund establishes one or more series of shares in addition to the Warburg Pincus Growth & Income Fund and the Warburg Pincus Balanced Fund with respect to which it desires to have the Custodian render services as custodian under the terms and for the purposes hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of shares shall become a Portfolio hereunder.
17. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.
18. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund on behalf of each of the Portfolios and the Custodian relating to the custody of the Fund's assets.
19. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether the Fund authorizes the Custodian to provide the Fund's name, address, and share position to requesting companies whose stock the Fund owns. If the Fund tells the Custodian "no", the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below.
YES [X] The Custodian is authorized to release the Fund's name, address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its -name and behalf by its duly authorized representative and its seal to be hereunder affixed as
of the day of 1994.
RBB FUND, INC.
STATE STREET BANK AND TRUST COMPANY
Schedule A
The following foreign banking institutions and foreign securities depositories have been approved by the Board of Directors of RBB FUND, INC. for use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
Date: ________________________
Exhibit 9(a)
TRANSFER AGENCY AGREEMENT
(Sansom Street Classes)
THIS AGREEMENT is made as of August 16, 1988 between THE RBB FUND, INC., a Maryland corporation (the "Fund"), and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent") which is an indirect, wholly-owned subsidiary of PNC Financial Corp.
R E C I T A L
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 desires to retain the Transfer Agent to serve as the Fund's transfer agent, registrar, and dividend disbursing agent with respect to Shares of its Class I Class J and Class K Common Stock (the "Sansom Street Classes"), par value $.001 per share, and the Transfer Agent 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 the Transfer Agent to serve as transfer agent, registrar and dividend disbursing agent for the Fund for the period and on the terms set forth in this Agreement with respect to shares of the Sansom Street Classes (the "Shares"). The Transfer Agent shall identify to each Sansom Street Class, or any additional class hereafter created that is designated by the Fund as a Sansom Street Class, property belonging to such Sansom Street Class and in such reports, confirmations and notices to the Fund called for under this Agreement shall identify the Sansom Street Class to which such report, confirmation or notice pertains. The Transfer Agent accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Paragraph 16 of this Agreement.
2. Delivery of Documents. The Fund has furnished the Transfer Agent with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the appointment of the Transfer Agent as transfer agent and registrar and dividend disbursing agent for the Sansom Street Classes and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Fund's officers and other persons authorized to issue Oral Instructions and to sign Written Instructions, as hereinafter defined, on behalf of the Fund and to execute stock certificates representing Shares;
(c) The Fund's Articles of Incorporation filed with the Department of Assessments and Taxation of the State of Maryland on February 29, 1988 and all amendments thereto (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, are herein called the "Charter");
(d) The Fund's Articles Supplementary filed with the Department of Assessments and Taxation of the State of Maryland on March 24, 1988, and all further Articles Supplementary filed with the State of Maryland (the "Articles Supplementary");
(e) The Fund's By-Laws and all amendments thereto (such By-Laws, as presently in effect and as they shall from time to time be amended, are herein called the "By-Laws");
(f) Copies of all documents relating to any voluntary investor service plans sponsored by the Fund;
(g) Each Investment Advisory and Administration Agreement between Provident Institutional Management Corporation (the "Advisor") and the Fund relating to a Sansom Street Class (collectively, the "Advisory Agreements") and each Sub-Advisory Agreement between Provident National Bank (which in its capacity as Sub-Advisor is hereinafter referred to as the "Sub-Advisor") and the Advisor relating to a Sansom Street Class (collectively with the Advisory Agreements, the "Advisory Contracts");
(h) The Custodian Agreement between Provident National Bank (which in its capacity as custodian is hereinafter referred to as the "Custodian") and the Fund dated as of August 16, 1988 (the "Custodian Agreement");
(i) Each Distribution Agreement between Planco Financial Services, Inc. (the "Distributor") and the Fund with respect to any Sansom Street Class (collectively, the "Distribution Agreements") and the form of each related Dealer Agreement for broker-dealers participating in the distribution of any Sansom Street Class ("Participating Dealers");
(j) Each Plan of Distribution pursuant to Rule l2b-1 under the Investment Company Act of 1940 with respect to a Sansom Street Class (collectively, the "Distribution Plans");
(k) Each Shareholder Servicing Agreement, if any, with respect to a Sansom Street Class (collectively, the "Shareholder Servicing Agreements");
(l) Each Non-12b-1 Shareholder Services Plan, any, with respect to a Sansom Street Class (collectively, the "Shareholder Services Plans");
(m) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission ("SEC") on March 24, 1988;
(n) The Fund's most recent Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-20827) and under the 1940 Act as filed with the SEC on March 24, 1988 relating to the Shares, and all amendments thereto;
(o) The Fund's most recent prospectuses relating to any of the Shares (each such prospectus, as presently in effect and all amendments and supplements thereto herein called a "Prospectus"); and
(p) Before the Fund engages in any transactions regulated by the Commodity Futures Trading Commission ("CFTC"), a copy of either (i) a filed notice of eligibility to claim the exclusion from the definition of "commodity pool operator" contained in Section 2(a)(1)(A) of the ("CEA") that is provided in Rule 4.5 under the CEA, together with all supplements as are required by the CFTC, or (ii) a letter which has been granted the Fund by the CFTC which states that the Fund will not be treated as a "pool" as defined in Section 4.10(d) of the CFTC's General Regulations, or (iii) a letter which has been granted the Fund by the CFTC which states that the CFTC will not take any enforcement action if the Fund does not register as a "commodity pool operator."
The Fund will furnish the Transfer Agent from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term "Authorized Person" means any officer of the Fund and any other person, whether or not any such person is an officer or employee of the Fund, duly authorized by the Board of Directors of the Fund to give oral and Written Instructions on behalf of the Fund and listed on the Certificate annexed hereto as Appendix A or any amendment thereto as may be received by the Transfer Agent from time to time.
(b) "Oral Instructions". As used in this Agreement, the term "Oral Instructions" means oral instructions actually received by the Transfer Agent from an Authorized Person or from a person reasonably believed by the Transfer Agent to be an Authorized Person. The Fund agrees to deliver to the Transfer Agent, at the time and in the manner specified in Paragraph 4(b) of this Agreement, Written Instructions confirming Oral Instructions.
(c) "Written Instructions". As used in this Agreement, the term "Written Instructions" means written instructions delivered by hand, mail, tested telegram, cable, telex or facsimile sending device, and received by the Transfer Agent and signed by an Authorized Person.
4. Instructions Consistent with Charter and By-Laws.
(a) Unless otherwise provided in this Agreement the Transfer Agent shall act only upon Oral or Written Instructions. Although the Transfer Agent may know of the provisions of the Charter and By-Laws of the Fund, the Transfer Agent may assume that any Oral or Written Instructions received hereunder are not in any way inconsistent with any provisions of such Charter or By-Laws or any vote, resolution or proceeding of the Shareholders, or of the Board of Directors, or of any committee thereof.
(b) The Transfer Agent shall be entitled to rely upon any Oral Instructions and any Written Instructions actually received by the Transfer Agent pursuant to this Agreement. The Fund agrees to forward to the Transfer Agent Written Instructions confirming Oral Instructions in such manner that the Written Instructions are received by the Transfer Agent by the close of business of the same day that such Oral Instructions are given to the Transfer Agent. The Fund agrees that the fact that such confirming Written Instructions are not received by the Transfer Agent shall in no way affect the validity of the transactions or enforceability of the transactions authorized by the Fund by giving Oral Instructions. The Fund agrees that the Transfer Agent shall incur no liability to the Fund in acting upon Oral Instructions given to the Transfer Agent hereunder concerning such transactions, provided such instructions reasonably appear to have been received from an Authorized Person.
5. Transactions Not Requiring Instructions. In the absence of contrary Written Instructions, the Transfer Agent is authorized to take the following actions:
(a) Issuance of Shares. Upon receipt of a purchase order from or on behalf of an investor for the purchase of Shares and sufficient information, including a completed application to purchase ("Application"), to enable the Transfer Agent to establish a Shareholder account and to determine which Class of Shares the investor wishes to purchase, and after confirmation of receipt of or crediting of Federal funds for such order from the Fund's Custodian, receipt by the Transfer Agent of a check payable to the Transfer Agent for such order, the Transfer Agent shall issue and credit the account of the investor or other record holder with Shares in the manner described in the Prospectus relating to such Shares.
(b) Transfer of Shares; Uncertificated Securities. Where a Shareholder does not hold a certificate representing the number of Shares in his account and does provide the Transfer Agent with instructions for the transfer of such Shares and such other appropriate documentation to permit a transfer as specified in the Prospectus relating to such Shares, then the Transfer Agent shall register such Shares and shall deliver them pursuant to instructions received from the transferor, pursuant to the rules of the exchange upon which Shares are listed (if any), the rules and regulations of the SEC, and the law of the State of Maryland relating to the transfer of shares of common stock.
(c) Stock Certificates. If at any time the Fund issues stock certificates with respect to any Sansom Street Class of Shares, the following provisions will apply with respect to such Sansom Street Class of Shares:
(i) The Fund will supply the Transfer Agent with a sufficient supply of stock certificates representing such class of Shares, in the form approved from time to time by the Board of Directors of the Fund, and, from time to time, shall replenish such supply upon request of the Transfer Agent. Such stock certificates shall be properly signed, manually or by facsimile signature, by the duly authorized officers of the Fund, whose names and positions shall be set forth on Appendix B, and shall bear the corporate seal or facsimile thereof of the Fund, and notwithstanding the death, resignation or removal of any officer of the Fund, such executed certificates bearing the manual or facsimile signature of such officer shall remain valid and may be issued to Shareholders until the Transfer Agent is otherwise directed by Written Instructions.
(ii) In the case of the loss or destruction of any certificate representing any class of Shares, no new certificate shall be issued in lieu thereof, unless there shall first have been furnished an appropriate bond of indemnity issued by the surety company approved by the Transfer Agent.
(iii) Upon receipt of signed stock certificates, which shall be in proper form for transfer, and upon cancellation or destruction thereof, the Transfer Agent shall countersign, register and issue new certificates for the same number of such class of Shares and shall deliver them pursuant to instructions received from the transferor, the rules and regulations of the SEC, and the law of the State of Maryland relating to the transfer of shares of common stock.
(iv) Upon receipt of the stock certificates, which shall be in proper form for transfer, together with the Shareholder's instructions to hold such stock certificates for safekeeping, the Transfer Agent shall reduce such Shares to uncertificated status, while retaining the appropriate registration in the name of the Shareholder upon the transfer books.
(v) Upon receipt of written instructions from a Shareholder of uncertificated securities for a certificate in the number of Shares in his account, the Transfer Agent will issue such stock certificates and deliver them to the Shareholder.
(d) Redemption of Shares. Upon receipt of a redemption order from a Shareholder in the manner and form specified in the Prospectus relating to such Shares, the Transfer Agent shall redeem the number of Shares so indicated from the redeeming Shareholder's account and receive from the Fund's Custodian and disburse to the redeeming Shareholder or Shareholder account as designated in the Application the redemption proceeds therefor or, in the case of a redemption check, to the party presenting such check for payment in accordance with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian.
6. Authorized Shares. The Fund's authorized capital stock
consists of ten billion (10,000,000,000) shares of Common Stock, par value $.001
per share, of which: 100 million (100,000,000) Shares constitute the Class A
Shares, 100 million (100,000,000) Shares constitute the Class B Shares, 100
million (100,000,000) Shares constitute the Class C Shares, 100 million
(100,000,000) Shares constitute the Class D Shares, 500 million (500,000,000)
Shares constitute the Class E Shares, 500 million (500,000,000) Shares
constitute the Class F Shares, 500 million (500,000,000) Shares constitute the
Class G Shares, 500 million (500,000,000) Shares constitute the Class H Shares,
500 million (500,000,000) Shares constitute the Class I Shares, 500 million
(500,000,000) Shares constitute the Class J Shares, 500 million (500,000,000)
Shares constitute the Class K Shares, 500 million (500,000,000) Shares
constitute the Class L Shares, 500 million (500,000,000) Shares constitute the
Class M Shares, and 500 million (500,000,000) Shares constitute the Class N
Shares. The Fund may from time to time authorize the issuance of additional
shares of its Common Stock, issue additional series or classes of shares of its
Common Stock or classify and reclassify shares of such series or class and shall
notify the Transfer Agent of any such authorization, issuance, classification or
reclassification. The Fund agrees to notify the Transfer Agent promptly of any
change in the number of authorized Shares of any Sansom Street Class and of any
change in the number of Shares registered under the 1933 Act. The Transfer Agent
shall record issues of all Shares and shall notify the Fund in case any proposed
issue of Shares by the Fund shall result in an over-issue, in which case the
Transfer Agent shall refuse to issue said Shares and shall not countersign and
issue certificates for such Shares.
7. Dividends and Distributions. The Fund shall furnish the Transfer Agent with appropriate evidence of action by the Fund's Board of Directors authorizing the declaration and payment of dividends and distributions as described in the Prospectuses. After deducting any amount required to be withheld by any applicable tax laws, rules and regulations or other applicable laws, the Transfer Agent shall in accordance with the instructions in proper form from a Shareholder and the provisions of the Fund's Charter and applicable Prospectus, pay such dividends to the Shareholders in the manner described in the applicable Prospectus. In lieu of receiving from the Fund's Custodian and paying to Shareholders cash dividends or distributions, the Transfer Agent may arrange for the direct payment of cash dividends and distributions to Shareholders by the Fund's Custodian, in accordance with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian.
The Transfer Agent shall prepare, file with the Internal Revenue Service and other appropriate taxing authorities, and address and mail to Shareholders such returns and information relating to dividends and distributions paid by the Fund as are required to be so prepared, filed and mailed by applicable laws, rules and regulations, or such substitute form of notice as may from time to time be permitted or required by the Internal Revenue Service. On behalf of the Fund, the Transfer Agent shall mail certain requests for Shareholders' certifications under penalties of perjury and pay on a timely basis to the appropriate Federal authorities any taxes to be withheld on dividends and distributions paid by the Fund, all as required by applicable Federal tax laws and regulations.
In accordance with the applicable Prospectus and such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian, the Transfer Agent shall (a) arrange for issuance of Shares obtained through (1) transfers of funds from Shareholders' accounts at financial institutions, (2) the Fund's pre-authorized check plan, and (3) the Fund's right of accumulation plan; (4) the Fund's automatic investing program; (b) arrange for the exchange of Shares of a class or series of the Fund having an exchange privilege for Shares of other classes or series of the Fund to which such exchange privilege extends; and (c) arrange for systematic withdrawals from the account of a Shareholder participating in the Fund's systematic withdrawal program.
8. Communications with Shareholders.
(a) Communications to Shareholders. The Transfer Agent will address and mail all communications by the Fund to its Shareholders, including reports to Shareholders, confirmations of purchases and sales of Shares, monthly statements, year-end federal tax information, dividend and distribution notices and proxy material for its meetings of Shareholders. The Transfer Agent will receive and tabulate the proxy cards for the meetings of the Fund's Shareholders.
(b) Correspondence. The Transfer Agent will answer such correspondence from Shareholders, securities brokers and others relating to its duties hereunder and such other correspondence as may from time to time be mutually agreed upon between the Transfer Agent and the Fund.
9. Records. The Transfer Agent shall maintain records of the accounts for each Shareholder showing the following information:
(a) name, address and United States Tax Identification or Social Security number;
(b) number and Sansom Street Class of Shares held and number and Sansom Street Class of Shares for which certificates, if any, have been issued, including certificate numbers and denominations;
(c) historical information regarding the account of each Shareholder, including dividends and distributions paid and the date and price for all transactions on a Shareholder's account;
(d) any stop or restraining order placed against a Shareholder's account;
(e) any correspondence relating to the current maintenance of a Shareholder's account;
(f) information with respect to withholdings; and
(g) any information required in order for the Transfer Agent to perform any calculations contemplated or required by this Agreement.
The Transfer Agent shall keep a record of all redemption checks and dividend checks returned by postal authorities, and shall maintain such records as are required for the Fund to comply with the escheat laws of any State or other authority.
The books and records pertaining to the Fund which are in the possession of the Transfer Agent 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 and shall, to the extent practicable, be maintained separately for each portfolio of the Fund. The Fund, or the Fund's authorized representatives, shall have access to such books and records at all times during the Transfer Agent's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Transfer Agent to the Fund or the Fund's authorized representative at the Fund's expense.
10. Ongoing Functions. The Transfer Agent will perform the following functions on an ongoing basis:
(a) furnish daily reports of transactions in Shares;
(b) furnish monthly reports of transactions in Fund Shares by type (custodial, trust, Keogh, IRA, other) including numbers of accounts;
(c) furnish state-by-state blue sky registration reports to the Fund;
(d) calculate sales load or compensation payment, if applicable, and provide such information to the Fund;
(e) calculate dealer commissions for the Fund, as applicable;
(f) provide toll-free lines for direct Shareholder use, plus customer liaison staff with on-line inquiry capacity;
(g) mail duplicate confirmations to dealers of their clients' activity, whether executed through the dealer or directly with the Transfer Agent;
(h) provide detail for underwriter or broker confirmations and other participating dealer Shareholder accounting, in accordance with such procedures as may be agreed upon between the Fund and the Transfer Agent;
(i) provide Shareholder lists and statistical information concerning accounts to the Fund; and
(j) provide timely notification of Fund activity and such other information as may be agreed upon from time to time between the Transfer Agent and the Fund Custodian, to the Fund or the Custodian.
11. Cooperation with Accountants. The Transfer Agent shall cooperate with the Fund's independent public accountants and shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion as such may be required by the Fund from time to time.
12. Confidentiality. The Transfer Agent agrees on behalf of itself and its employees to treat confidentially all records and other information relative to the Fund and its prior, present or potential Shareholders, 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 Transfer Agent 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.
13. Equipment Failures. In the event of equipment failures beyond the Transfer Agent's control, the Transfer Agent shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no liability with respect thereto. The foregoing obligation shall not extend to computer terminals located outside of premises maintained by the Transfer Agent. The Transfer Agent shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available.
14. Right to Receive Advice.
(a) Advice of Fund. If the Transfer Agent shall be in doubt as to any action to be taken or omitted by it, it may request, and shall receive, from the Fund directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If the Transfer Agent shall be in doubt as to any question of law involved in any action to be taken or omitted by the Transfer Agent, it may request advice at its own cost from counsel of its own choosing (who may be counsel for the Advisor, the Fund or the Transfer Agent at the option of the Transfer Agent).
(c) Conflicting Advice. In case of conflict between directions, advice or Oral or Written Instructions received by the Transfer Agent pursuant to subparagraph (a) of this Paragraph and advice received by the Transfer Agent pursuant to subparagraph (b) of this Paragraph, the Transfer Agent shall be entitled to rely on and follow the advice received pursuant to the latter provision alone.
(d) Protection of the Transfer Agent. The Transfer Agent shall be protected in any action or inaction which it takes in reliance on any directions, advice or Oral or Written Instructions received pursuant to subparagraphs (a) or (b) of this Paragraph which the Transfer Agent, after receipt of any such directions, advice or Oral or Written Instructions, in good faith believes to be consistent with such directions, advice or Oral or Written Instructions, as the case may be. However, nothing in this Paragraph shall be construed as imposing upon the Transfer Agent any obligation (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions when received, unless, under the terms of another provision of this Agreement, the same is a condition to the Transfer Agent's properly taking or omitting to take such action. Nothing in this subparagraph shall excuse the Transfer Agent when an action or omission on the part of the Transfer Agent constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by the Transfer Agent of its duties and obligations under this Agreement.
15. Compliance with Governmental Rules and Regulations. The Transfer Agent assumes no responsibility for insuring that the Fund complies with all applicable requirements of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act, the CEA, and any laws, rules and regulations of governmental authorities having jurisdiction.
16. Compensation. As compensation for the services rendered by the Transfer Agent during the term of this Agreement, the Fund will pay to the Transfer Agent, with respect to each Sansom Street Class of the Fund, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
17. Indemnification. The Fund agrees to indemnify and hold harmless the Transfer Agent and its nominees and sub-contractors from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, 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 the Transfer Agent takes or does or omits to take or do (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon Oral or Written Instructions, provided, that neither the Transfer Agent nor any of its nominees or sub-contractors shall be indemnified against any liability to the Fund or to its Shareholders (or any expenses incident to such liability) arising out of the Transfer Agent's or such nominee's or such sub-contractor's own willful misfeasance, bad faith or negligence or reckless disregard of its duties in connection with the performance of its duties and obligations specifically described in this Agreement.
18. Responsibility of the Transfer Agent. The Transfer Agent 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 the Transfer Agent in writing. In the performance of its duties hereunder, the Transfer Agent shall be obligated to exercise care and diligence and to act in good faith and to use its best efforts within reasonable limits to insure the accuracy and completeness of all services performed under this Agreement. The Transfer Agent shall be responsible for its own negligent failure to perform its duties under this Agreement, but to the extent that duties, obligations and responsibilities are not expressly set forth in this Agreement, the Transfer Agent shall not be liable for any act or omission which does not constitute willful misfeasance, bad faith or gross negligence on the part of the Transfer Agent or reckless disregard of such duties, obligations and responsibilities. Without limiting the generality of the foregoing or of any other provision of this Agreement, the Transfer Agent 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 Oral or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, if any, and which the Transfer Agent reasonably believes to be genuine, or (b) delays or errors or loss of data occurring by reason of circumstances beyond the Transfer Agent's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown (except as provided in Paragraph 13), flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply.
19. Duration and Termination. This Agreement shall continue until termination by the Fund or by the Transfer Agent on sixty (60) days written notice.
20. Registration as a Transfer Agent. The Transfer Agent represents that it is currently registered with the appropriate Federal agency for the registration of transfer agents, and that it will remain so registered for the duration of this Agreement. The Transfer Agent agrees that it will promptly notify the Fund in the event of any material change in its status as a registered transfer agent. Should the Transfer Agent fail to be registered with the SEC as a transfer agent at any time during this Agreement, the Fund may, on written notice to the Transfer Agent, immediately terminate this Agreement.
21. Notices. All notices and other communications, including Written Instructions (collectively referred to as "Notice" or "Notices" in this Paragraph), hereunder shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notices shall be addressed (a) if to the Transfer Agent at P. 0. Box 8950, Wilmington, Delaware 19899; (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 and address of the addressee thereof are, at the time of sending, more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given five days after it is sent, or if sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately, and, if the location of the sender of a Notice and the address of the addressee thereof are, at the time of sending, not more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given three days after it is sent, or if 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. All postage, cable, telegram, telex and facsimile sending device charges arising from the sending of a Notice hereunder shall be paid by the sender.
22. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
23. 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.
24. Delegation of Duties. On thirty (30) days prior written
notice to the Fund, the Transfer Agent may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of Provident
National Bank or PNC Financial Corp, provided that (i) the delegate agrees with
the Transfer Agent to comply with all relevant provisions of the 1940 Act; and
(ii) the Transfer Agent and such delegate shall promptly provide such
information as the Fund may request, and respond to such question as the Fund
may ask, relative to the delegation, including (without limitation) the
capabilities of the delegate. Upon such assignment and delegation, the Transfer
Agent shall be relieved of any further duties or obligations hereunder and from
any liability for any acts or failures to act occurring thereafter.
25. 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.
26. Miscellaneous. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties hereto may embody in one or more separate documents their agreement, if any, with respect to Oral Instructions. 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 Delaware and governed by Delaware 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written.
[ SEAL ]
THE RBB FUND, INC.
Attest:________________________________ By: /s/Joe McKee Thomson
___________________
[ SEAL ] Joe McKee Thomson
|
PROVIDENT FINANCIAL
PROCESSING CORPORATION
Attest:________________________________ By: /s/Morton B. Comer
__________________
Morton B. Comer
|
APPENDIX A
Authorized Persons
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
APPENDIX B
Joe McKee Thomson
_______________________ ______________________________
President (signature)
Morgan R. Jones
_______________________ ______________________________
Secretary (signature)
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Exhibit 9(b)
TRANSFER AGENCY AGREEMENT
(Cash Preservation Classes)
THIS AGREEMENT is made as of August 16, 1988 between THE RBB FUND, INC., a Maryland corporation (the "Fund"), and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent") which is an indirect, wholly-owned subsidiary of PNC Financial Corp.
R E C I T A L
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 desires to retain the Transfer Agent to serve as the Fund's transfer agent, registrar, and dividend disbursing agent with respect to Shares of its Class G and Class H Common Stock (the "Cash Preservation Classes"), par value $.001 per share, and the Transfer Agent 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 the Transfer Agent to serve as transfer agent, registrar and dividend disbursing agent for the Fund for the period and on the terms set forth in this Agreement with respect to shares of the Cash Preservation Classes (the "Shares"). The Transfer Agent shall identify to each Cash Preservation Class, or any additional class hereafter created that is designated by the Fund as a Cash Preservation Class, property belonging to such Cash Preservation Class and in such reports, confirmations and notices to the Fund called for under this Agreement shall identify the Cash Preservation Class to which such report, confirmation or notice pertains. The Transfer Agent accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Paragraph 16 of this Agreement.
2. Delivery of Documents. The Fund has furnished the Transfer Agent with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the appointment of the Transfer Agent as transfer agent and registrar and dividend disbursing agent for the Cash Preservation Classes and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Fund's officers and other persons authorized to issue Oral Instructions and to sign Written Instructions, as hereinafter defined, on behalf of the Fund and to execute stock certificates representing Shares;
(c) The Fund's Articles of Incorporation filed with the Department of Assessments and Taxation of the State of Maryland on February 29, 1988 and all amendments thereto (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, are herein called the "Charter");
(d) The Fund's Articles Supplementary filed with the Department of Assessments and Taxation of the State of Maryland on March 24, 1988, and all further Articles Supplementary filed with the State of Maryland (the "Articles Supplementary");
(e) The Fund's By-Laws and all amendments thereto (such By-Laws,as presently in effect and as they shall from time to time be amended, are herein called the "By-Laws");
(f) Copies of all documents relating to any voluntary investor service plans sponsored by the Fund;
(g) Each Investment Advisory and Administration Agreement between Provident Institutional Management Corporation (the "Advisor") and the Fund relating to a Cash Preservation Class (collectively, the "Advisory Agreements") and each Sub-Advisory Agreement between Provident National Bank (which in its capacity as Sub-Advisor is hereinafter referred to as the "Sub-Advisor") and the Advisor relating to a Cash Preservation Class (collectively with the Advisory Agreements, the "Advisory Contracts");
(h) The Custodian Agreement between Provident National Bank (which in its capacity as custodian is hereinafter referred to as the "Custodian") and the Fund dated as of August 16, 1988 (the "Custodian Agreement");
(i) Each Distribution Agreement between Planco Financial Services, Inc. (the "Distributor") and the Fund with respect to any Cash Preservation Class (collectively, the "Distribution Agreements") and the form of each related Dealer Agreement for broker-dealers participating in the distribution of any Cash Preservation Class ("Participating Dealers");
(j) Each Plan of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940 with respect to a Cash Preservation Class (collectively, the "Distribution Plans");
(k) Each Shareholder Servicing Agreement, if any, with respect to a Cash Preservation Class (collectively, the "Shareholder Servicing Agreements");
(1) Each Non-12b-l Shareholder Services Plan, if any, with respect to a Cash Preservation Class (collectively, the "Shareholder Services Plans");
(m) The Fund's Notification of Registration filed pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the Securities and Exchange Commission ("SEC") on March 24, 1988;
(n) The Fund's most recent Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-20827) and under the 1940 Act as filed with the SEC on March 24, 1988 relating to the Shares, and all amendments thereto;
(o) The Fund's most recent prospectuses relating to any of the Shares (each such prospectus, as presently in effect and all amendments and supplements thereto herein called a "Prospectus"); and
(p) Before the Fund engages in any transactions regulated by the Commodity Futures Trading Commission ("CFTC"), a copy of either (i) a filed notice of eligibility to claim the exclusion from the definition of "commodity pool operator" contained in Section 2(a)(1)(A) of the ("CEA") that is provided in Rule 4.5 under the CEA, together with all supplements as are required by the CFTC, or (ii) a letter which has been granted the Fund by the CFTC which states that the Fund will not be treated as a "pool" as defined in Section 4.10(d) of the CFTC's General Regulations, or (iii) a letter which has been granted the Fund by the CFTC which states that the CFTC will not take any enforcement action if the Fund does not register as a "commodity pool operator."
The Fund will furnish the Transfer Agent from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term "Authorized Person" means any officer of the Fund and any other person, whether or not any such person is an officer or employee of the Fund, duly authorized by the Board of Directors of the Fund to give Oral and Written Instructions on behalf of the Fund and listed on the Certificate annexed hereto as Appendix A or any amendment thereto as may be received by the Transfer Agent from time to time.
(b) "Oral Instructions". As used in this Agreement, the term "Oral Instructions" means oral instructions actually received by the Transfer Agent from an Authorized Person or from a person reasonably believed by the Transfer Agent to be an Authorized Person. The Fund agrees to deliver to the Transfer Agent, at the time and in the manner specified in Paragraph 4(b) of this Agreement, Written Instructions confirming Oral Instructions.
(c) "Written Instructions". As used in this Agreement, the term "Written Instructions" means written instructions delivered by hand, mail, tested telegram, cable, telex or facsimile sending device, and received by the Transfer Agent and signed by an Authorized Person.
4. Instructions Consistent with Charter and By-Laws.
(a) Unless otherwise provided in this Agreement, the Transfer Agent shall act only upon Oral or Written Instructions. Although the Transfer Agent may know of the provisions of the Charter and By-Laws of the Fund, the Transfer Agent may assume that any Oral or Written Instructions received hereunder are not in any way inconsistent with any provisions of such Charter or By-Laws or any vote, resolution or proceeding of the Shareholders, or of the Board of Directors, or of any committee thereof.
(b) The Transfer Agent shall be entitled to rely upon any Oral Instructions and any Written Instructions actually received by the Transfer Agent pursuant to this Agreement. The Fund agrees to forward to the Transfer Agent Written Instructions confirming Oral Instructions in such manner that the Written Instructions are received by the Transfer Agent by the close of business of the same day that such Oral Instructions are given to the Transfer Agent. The Fund agrees that the fact that such confirming Written Instructions are not received by the Transfer Agent shall in no way affect the validity of the transactions or enforceability of the transactions authorized by the Fund by giving Oral Instructions. The Fund agrees that the Transfer Agent shall incur no liability to the Fund in acting upon Oral Instructions given to the Transfer Agent hereunder concerning such transactions, provided such instructions reasonably appear to have been received from an Authorized Person.
5. Transactions Not Requiring Instructions. In the absence of contrary Written Instructions, the Transfer Agent is authorized to take the following actions:
(a) Issuance of Shares. Upon receipt of a purchase order from or on behalf of an investor for the purchase of Shares and sufficient information, including a completed application to purchase ("Application"), to enable the Transfer Agent to establish a Shareholder account and to determine which Class of Shares the investor wishes to purchase, and after confirmation of receipt of or crediting of Federal funds for such order from the Fund's Custodian, receipt by the Transfer Agent of a check payable to the Transfer Agent for such order, the Transfer Agent shall issue and credit the account of the investor or other record holder with Shares in the manner described in the Prospectus relating to such Shares.
(b) Transfer of Shares; Uncertificated Securities. Where a Shareholder does not hold a certificate representing the number of Shares in his account and does provide the Transfer Agent with instructions for the transfer of such Shares and such other appropriate documentation to permit a transfer as specified in the Prospectus relating to such Shares, then the Transfer Agent shall register such Shares and shall deliver them pursuant to instructions received from the transferor, pursuant to the rules of the exchange upon which Shares are listed (if any), the rules and regulations of the SEC, and the law of the State of Maryland relating to the transfer of shares of common stock.
(c) Stock Certificates. If at any time the Fund issues stock certificates with respect to any Cash Preservation Class of Shares, the following provisions will apply with respect to such Cash Preservation Class of Shares:
(i) The Fund will supply the Transfer Agent with a sufficient supply of stock certificates representing such class of Shares, in the form approved from time to time by the Board of Directors of the Fund, and, from time to time, shall replenish such supply upon request of the Transfer Agent. Such stock certificates shall be properly signed, manually or by facsimile signature, by the duly authorized officers of the Fund, whose names and positions shall be set forth on Appendix B, and shall bear the corporate seal or facsimile thereof of the Fund, and notwithstanding the death, resignation or removal of any officer of the Fund, such executed certificates bearing the manual or facsimile signature of such officer shall remain valid and may be issued to Shareholders until the Transfer Agent is otherwise directed by Written Instructions.
(ii) In the case of the loss or destruction of any certificate representing any class of Shares, no new certificate shall be issued in lieu thereof, unless there shall first have been furnished an appropriate bond of indemnity issued by the surety company approved by the Transfer Agent.
(iii) Upon receipt of signed stock certificates, which shall be in proper form for transfer, and upon cancellation or destruction thereof, the Transfer Agent shall countersign, register and issue new certificates for the same number of such class of Shares and shall deliver them pursuant to instructions received from the transferer, the rules and regulations of the SEC, and the law of the State of Maryland relating to the transfer of shares of common stock.
(iv) Upon receipt of the stock certificates, which shall be in proper form for transfer, together with the Shareholder's instructions to hold such stock certificates for safekeeping, the Transfer Agent shall reduce such Shares to uncertificated status, while retaining the appropriate registration in the name of the Shareholder upon the transfer books.
(v) Upon receipt of written instructions from a Shareholder of uncertificated securities for a certificate in the number of Shares in his account, the Transfer Agent will issue such stock certificates and deliver them to the Shareholder.
(d) Redemption of Shares. Upon receipt of a redemption order from a Shareholder in the manner and form specified in the Prospectus relating to such Shares, the Transfer Agent shall redeem the number of Shares so indicated from the redeeming Shareholder's account and receive from the Fund's Custodian and disburse to the redeeming Shareholder or Shareholder account as designated in the Application the redemption proceeds therefore or, in the case of a redemption check, to the party presenting such check for payment in accordance with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian.
6. Authorized Shares. The Fund's authorized capital stock
consists of ten billion (10,000,000,000) shares of Common Stock, par value $.001
per share, of which: 100 million (100,000,000) Shares constitute the Class A
Shares, 100 million (100,000,000) Shares constitute the Class B Shares, 100
million (100,000,000) Shares constitute the Class C Shares, 100 million
(100,000,000) Shares constitute the Class D Shares, 500 million (500,000,000)
Shares constitute the Class E Shares, 5OO million (500,000,000) Shares
constitute the Class F Shares, 500 million (500,000,000) Shares constitute the
Class G Shares, 500 million (500,000,000) Shares constitute the Class H Shares,
500 million (500,000,000) Shares constitute the Class I Shares, 500 million
(500,000,000) Shares constitute the Class J Shares, 500 million (500,000,000)
Shares constitute the Class K Shares, 500 million (500,000,000) Shares
constitute the Class L Shares, 500 million (500,000,000) Shares constitute the
Class M Shares, and 500 million (500,000,000) Shares constitute the Class N
Shares. The Fund may from time to time authorize the issuance of additional
shares of its Common Stock, issue additional series or classes of shares of its
Common Stock or classify and reclassify shares of such series or class and shall
notify the Transfer Agent of any such authorization, issuance, classification or
reclassification. The Fund agrees to notify the Transfer Agent promptly of any
change in the number of authorized Shares of any Cash Preservation Class and of
any change in the number of Shares registered under the 1933 Act. The Transfer
Agent shall record issues of all Shares and shall notify the Fund in case any
proposed issue of Shares by the Fund shall result in an over-issue, in which
case the Transfer Agent shall refuse to issue said Shares and shall not
countersign and issue certificates for such Shares.
7. Dividends and Distributions. The Fund shall furnish the Transfer Agent with appropriate evidence of action by the Fund's Board of Directors authorizing the declaration and payment of dividends and distributions as described in the Prospectuses. After deducting any amount required to be withheld by any applicable tax laws, rules and regulations or other applicable laws, the Transfer Agent shall in accordance with the instructions in proper form from a Shareholder and the provisions of the Fund's Charter and applicable Prospectus, pay such dividends to the Shareholders in the manner described in the applicable Prospectus. In lieu of receiving from the Fund's Custodian and paying to Shareholders cash dividends or distributions, the Transfer Agent may arrange for the direct payment of cash dividends and distributions to Shareholders by the Fund's Custodian, in accordance with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian.
The Transfer Agent shall prepare, file with the Internal Revenue Service and other appropriate taxing authorities, and address and mail to Shareholders such returns and information relating to dividends and distributions paid by the Fund as are required to be so prepared, filed and mailed by applicable laws, rules and regulations, or such substitute form of notice as may from time to time be permitted or required by the Internal Revenue Service. On behalf of the Fund, the Transfer Agent shall mail certain requests for Shareholders' certifications under penalties of perjury and pay on a timely basis to the appropriate Federal authorities any taxes to be withheld on dividends and distributions paid by the Fund, all as required by applicable Federal tax laws and regulations.
In accordance with the applicable Prospectus and such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian, the Transfer Agent shall (a) arrange for issuance of Shares obtained through (1) transfers of funds from Shareholders' accounts at financial institutions, (2) the Fund's pre-authorized check plan, and (3) the Fund's right of accumulation plan; (4) the Fund's automatic investing program; (b) arrange for the exchange of Shares of a class or series of the Fund having an exchange privilege for Shares of other classes or series of the Fund to which such exchange privilege extends; and (c) arrange for systematic withdrawals from the account of a Shareholder participating in the Fund's systematic withdrawal program.
8. Communications with Shareholders.
(a) Communications to Shareholders. The Transfer Agent will address and mail all communications by the Fund to its Shareholders, including reports to Shareholders, confirmations of purchases and sales of Shares, monthly statements, year-end federal tax information, dividend and distribution notices and proxy material for its meetings of Shareholders. The Transfer Agent will receive and tabulate the proxy cards for the meetings of the Fund's Shareholders.
(b) Correspondence. The Transfer Agent will answer such correspondence from Shareholders, securities brokers and others relating to its duties hereunder and such other correspondence as may from time to time be mutually agreed upon between the Transfer Agent and the Fund.
9. Records. The Transfer Agent shall maintain records of the accounts for each Shareholder showing the following information:
(a) name, address and United States Tax Identification or Social Security number;
(b) number and Cash Preservation Class of Shares held and number and Cash Preservation Class of Shares for which certificates, if any, have been issued, including certificate numbers and denominations;
(c) historical information regarding the account of each Shareholder, including dividends and distributions paid and the date and price for all transactions on a Shareholder's account;
(d) any stop or restraining order placed against a Shareholder's account;
(e) any correspondence relating to the current maintenance of a Shareholder's account;
(f) information with respect to withholdings; and,
(g) any information required in order for the Transfer Agent to perform any calculations contemplated or required by this Agreement.
The Transfer Agent shall keep a record of all redemption checks and dividend checks returned by postal authorities, and shall maintain such records as are required for the Fund to comply with the escheat laws of any State or other authority.
The books and records pertaining to the Fund which are in the possession of the Transfer Agent 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 and shall, to the extent practicable, be maintained separately for each portfolio of the Fund. The Fund, or the Fund's authorized representatives, shall have access to such books and records at all times during the Transfer Agent's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Transfer Agent to the Fund or the Fund's authorized representative at the Fund's expense.
10. Ongoing Functions. The Transfer Agent will perform the following functions on an ongoing basis:
(a) furnish daily reports of transactions in Shares;
(b) furnish monthly reports of transactions in Fund Shares by type (Keogh, IRA, other) including numbers of accounts;
(c) furnish state-by-state blue sky registration reports to the Fund;
(d) calculate sales load or compensation payment, if applicable, and provide such information to the Fund;
(e) calculate dealer commissions for the Fund, as applicable;
(f) provide toll-free lines for direct Shareholder use, plus customer liaison staff with on-line inquiry capacity;
(g) mail duplicate confirmations to dealers of their clients' activity, whether executed through the dealer or directly with the Transfer Agent;
(h) provide detail for underwriter or broker confirmations and other participating dealer Shareholder accounting, in accordance with such procedures as may be agreed upon between the Fund and the Transfer Agent;
(i) provide Shareholder lists and statistical information concerning accounts to the Fund; and
(j) provide timely notification of Fund activity and such other information as may be agreed upon from time to time between the Transfer Agent and the Fund Custodian, to the Fund or the Custodian.
11. Cooperation with Accountants. The Transfer Agent shall cooperate with the Fund's independent public accountants and shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion as such may be required by the Fund from time to time.
12. Confidentiality. The Transfer Agent agrees on behalf of itself and its employees to treat confidentially all records and other information relative to the Fund and its prior, present or potential Shareholders, 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 Transfer Agent 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.
13. Equipment Failures. In the event of equipment failures beyond the Transfer Agent's control, the Transfer Agent shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no liability with respect thereto. The foregoing obligation shall not extend to computer terminals located outside of premises maintained by the Transfer Agent. The Transfer Agent shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available.
14. Right to Receive Advice.
(a) Advice of Fund. If the Transfer Agent shall be in doubt as to any action to be taken or omitted by it, it may request, and shall receive, from the Fund directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If the Transfer Agent shall be in doubt as to any question of law involved in any action to be taken or omitted by the Transfer Agent, it may request advice at its own cost from counsel of its own choosing (who may be counsel for the Advisor, the Fund or the Transfer Agent at the option of the Transfer Agent).
(c) Conflicting Advice. In case of conflict between directions, advice or Oral or Written Instructions received by the Transfer Agent pursuant to subparagraph (a) of this Paragraph and advice received by the Transfer Agent pursuant to subparagraph (b) of this Paragraph, the Transfer Agent shall be entitled to rely on and follow the advice received pursuant to the latter provision alone.
(d) Protection of the Transfer Agent. Transfer Agent shall be protected in any action or inaction which it takes in reliance on any directions, advice or Oral or Written Instructions received pursuant to subparagraphs (a) or (b) of this Paragraph which the Transfer Agent, after receipt of any such directions, advice or Oral or Written Instructions, in good faith believes to be consistent with such directions, advice or Oral or Written Instructions, as the case may be. However, nothing in this Paragraph shall be construed as imposing upon the Transfer Agent any obligation (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions when received, unless, under the terms of another provision of this Agreement, the same is a condition to the Transfer Agent's properly taking or omitting to take such action. Nothing in this subparagraph shall excuse the Transfer Agent when an action or omission on the part of the Transfer Agent constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by the Transfer Agent of its duties and obligations under this Agreement.
15. Compliance with Governmental Rules and Regulations. The Transfer Agent assumes no responsibility for insuring that the Fund complies with all applicable requirements of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act, the CEA, and any laws, rules and regulations of governmental authorities having jurisdiction.
16. Compensation. As compensation for the services rendered by the Transfer Agent during the term of this Agreement, the Fund will pay to the Transfer Agent, with respect to each Cash Preservation Class of the Fund, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
17. Indemnification. The Fund agrees to indemnify and hold harmless the Transfer Agent and its nominees and sub-contractors from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the 1933 Act, the 1934 Art, the 1940 Act, the CEA, 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 the Transfer Agent takes or does or omits to take or do (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon Oral or Written Instructions, provided, that neither the Transfer Agent nor any of its nominees or sub-contractors shall be indemnified against any liability to the Fund or to its Shareholders (or any expenses incident to such liability) arising out of the Transfer Agent's or such nominee's or such sub-contractor's own willful misfeasance, bad faith or negligence or reckless disregard of its duties in connection with the performance of its duties and obligations specifically described in this Agreement.
18. Responsibility Of the Transfer Agent. The Transfer Agent 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 the Transfer Agent in writing. In the performance of its duties hereunder, the Transfer Agent shall be obligated to exercise care and diligence and to act in good faith and to use its best efforts within reasonable limits to insure the accuracy and completeness of all services performed under this Agreement. The Transfer Agent shall be responsible for its own negligent failure to perform its duties under this Agreement, but to the extent that duties, obligations and responsibilities are not expressly set forth in this Agreement, the Transfer Agent shall not be liable for any act or omission which does not constitute willful misfeasance, bad faith or gross negligence on the part of the Transfer Agent or reckless disregard of such duties, obligations and responsibilities. Without limiting the generality of the foregoing or of any other provision of this Agreement, the Transfer Agent 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 Oral or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, if any, and which the Transfer Agent reasonably believes to be genuine, or (b) delays or errors or loss of data occurring by reason of circumstances beyond the Transfer Agent's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown (except as provided in Paragraph 13), flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply.
19. Duration and Termination. This Agreement shall continue until termination by the Fund or by the Transfer Agent on sixty (60) days written notice.
20. Registration as a Transfer Agent. The Transfer Agent represents that it is currently registered with the appropriate Federal agency for the registration of transfer agents, and that it will remain so registered for the duration of this Agreement. The Transfer Agent agrees that it will promptly notify the Fund in the event of any material change in its status as a registered transfer agent. Should the Transfer Agent fail to be registered with the SEC as a transfer agent at any time during this Agreement, the Fund may, on written notice to the Transfer Agent, immediately terminate this Agreement.
21. Notices. All notices and other communications, including Written Instructions (collectively referred to as "Notice" or "Notices" in this Paragraph), hereunder shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notices shall be addressed (a) if to the Transfer Agent, at P. 0. Box 8950, Wilmington, Delaware 19899; (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 and the address of the addressee thereof are, at the time of sending, more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given five days after it is sent, or if sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately, and, if the location of the sender of a Notice and the address of the addressee thereof are, at the time of sending, not more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given three days after it is sent, or if 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. All postage, cable, telegram, telex and facsimile sending device charges arising from the sending of a Notice hereunder shall be paid by the sender.
22. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
23. 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.
24. Delegation of Duties. On thirty (30) days prior written
notice to the Fund, the Transfer Agent may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of Provident
National Bank or PNC Financial Corp, provided that (i) the delegate agrees with
the Transfer Agent to comply with all relevant provisions of the 1940 Act; and
(ii) the Transfer Agent and such delegate shall promptly Provide such
information as the Fund may request, and respond to such question as the Fund
may ask, relative to the delegation, including (without limitation) the
capabilities of the delegate. Upon such assignment and delegation, the Transfer
Agent shall be relieved of any further duties or obligations hereunder and from
any liability for any acts or failures to act occurring thereafter.
25. 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.
26. Miscellaneous. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties hereto may embody in one or more separate documents their agreement, if any, with respect to Oral Instructions. 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 Delaware and governed by Delaware 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written.
[ SEAL ]
THE RBB FUND, INC.
Attest:________________________________ By: /s/Joe McKee Thomson
[ SEAL ] __________________
Joe McKee Thomson
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PROVIDENT FINANCIAL
PROCESSING CORPORATION
Attest:________________________________ By: /s/ Morton B. Comer
____________________
Morton B. Comer
|
APPENDIX A
Authorized Persons
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
APPENDIX B
Joe McKee Thomson
_______________________ ______________________________
President (signature)
Morgan R. Jones
_______________________ ______________________________
Secretary (signature)
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THE RBB FUND, INC.
103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19803
SHAREHOLDER SERVICING AGREEMENT
(Sansom Street Money Shares)
Gentlemen:
We wish to enter into this Shareholder Servicing Agreement with you concerning the provision of support services to your clients ("Clients") who may from time to time beneficially own shares of Class I Common Stock, Par Value $.001 Per Share ("Class I Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide any or all of the
following support services to Clients who may from time to time beneficially own
Class I Shares: (i) aggregating and processing purchase and redemption requests
for Class I Shares from Clients and placing net purchase and redemption orders
with our transfer agent, Provident Financial Processing Corporation; (ii)
providing Clients with a service that invests the assets of their accounts in
Class I Shares pursuant to specific or pre-authorized instructions; (iii)
processing dividend payments from us on behalf of Clients; (iv) providing
information periodically to Clients showing their positions in Class I Shares;
(v) arranging for bank wires; (vi) responding to Client inquiries relating to
the services performed by you; (vii) providing subaccounting with respect to
Class I Shares beneficially owned by Clients or the information to us necessary
for subaccounting; (viii) if required by law, forwarding shareholder
communications from us (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
Clients; and (ix) providing such other similar services as we may reasonably
request to the extent you are permitted to do so under applicable statutes,
rules or regulations.
Section 2. You represent that: (a) you will provide to your Clients a schedule of any fees charged by you to your Clients in connection with the investment of their assets in Class I Shares; (b) you will retain payments received by you hereunder only if an investment in Class I Shares has been authorized by your Clients; and (c) the compensation paid to you hereunder will not be excessive or unreasonable.
Section 3. You will provide such office space and equipment, telephone facilities and personnel (which may be any part of the space, equipment and facilities currently used in your business, or any personnel employed by you) as may be reasonably necessary or beneficial in order to provide the aforementioned services to Clients.
Section 4. Neither you nor any or your officers, employees or agents are authorized to make any representations concerning us or Class I Shares except those contained in our then current prospectus for such Class I Shares, copies of which will be supplied by us, or caused to be supplied by Planco Financial Services, Inc. ("Planco"), to you, or in such supplemental literature or advertising as may be authorized by us in writing.
Section 5. 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 Planco in any matter or in any respect. By your written acceptance of this Agreement, you agree to and do release, indemnify and hold us harmless from and against any and all direct or indirect liabilities or losses resulting from requests, directions, actions or inactions of or by you or your officers, employees or agents regarding your responsibilities hereunder or the purchase, redemption, transfer or registration of Class I Shares by or on behalf of Clients. You and your employees will, upon request, be available during normal business hours to consult with us or our designees concerning the performance of your responsibilities under this Agreement.
Section 6. In consideration of the services and facilities provided by you hereunder, we will pay to you, and you will accept as full payment therefor, a fee at the annual rate of .10% of the average daily net asset value of the Class I Shares held of record by you from time to time on behalf of Clients (the "Clients' Class I Shares"), which fee will be computed daily and payable monthly. For purposes of determining the fees payable under this Section 6, the average daily net asset value of the Clients' Class I Shares will be computed in the manner specified in our registration statement (as the same is in effect from time to time) in connection with the computation of the net asset value of Class I Shares for purposes of purchases and redemptions. The fee rate stated above may be prospectively increased or decreased by us, in our sole discretion, at any time upon notice to you. You hereby agree, pursuant to and so long as our order of exemption from Section 18 of the Investment Company Act of 1940 relating to multiple classes of shares in an investment portfolio is in effect, to waive your fee hereunder on any day to the extent necessary to ensure that the fee required to be accrued does not exceed the income accrued by the Class I Shares on such day. Further, we may, in our discretion and without notice, suspend or withdraw the sale of Class I Shares, including the sale of such shares to you for the account of any Client or Clients.
Section 7. Any person authorized to direct the disposition of monies paid or payable by us pursuant to this Agreement will provide to our Board of Directors, and our Directors will review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. In addition, you will furnish us or our designees with such information as we or they may reasonably request (including, without limitation, periodic certifications confirming the provision to Clients of the services described herein), and will otherwise cooperate with us and our designees (including, without limitation, any auditors designated by us), in connection with the preparation of reports to our Board of Directors concerning this Agreement and the monies paid or payable by us pursuant hereto, as well as any other reports or filings that may be required by law.
Section 8. We may enter into other similar
Shareholder Servicing Agreements with any other person or persons without your
consent.
Section 9. By your written acceptance of this
Agreement, you represent, warrant and agree that in no event will any of the
services provided by you hereunder be primarily intended to result in the sale
of any shares issued by us.
Section 10. This Agreement will become effective on
the date a fully executed copy of this Agreement is received by us or our
designee. Unless sooner terminated, this Agreement will continue until August
16, 1989, and thereafter will continue automatically for successive annual
periods ending on August 16, provided such continuance is specifically approved
at least annually by us in the manner described in Section 13 hereof. This
Agreement is terminable, without penalty, at any time by us (which termination
may be by vote of a majority of our Disinterested Directors as defined in
Section 13 hereof) or by you upon notice to the other party herein.
Section 11. All notices and other communications to
either you or us will be duly given if mailed, telegraphed, telexed or
transmitted by similar telecommunications device to the appropriate address
shown herein.
Section 12. This Agreement will be construed in
accordance with the laws of the State of Maryland and is non-assignable by the
parties hereto.
Section 13. The form of this Agreement has been approved by vote of a majority of (i) our Board of Directors and (ii) those Directors who are not "interested persons" (as defined in the Investment Company Act of 1940) of us and have no direct or indirect financial interest in the operation of the Shareholder Services Plan adopted by us regarding the provision of support services to the beneficial owners of Class I Shares or in any agreements related thereto ("Disinterested Directors"), cast in person at a meeting called for the purpose of voting on such approval.
If you agree to be legally bound by the provisions of this Agreement, please sign a copy of this letter where indicated below and promptly return it to us, c/o Planco Financial Services, Inc., 16 Industrial Boulevard, Paoli, Pennsylvania 19301.
Very truly yours,
THE RBB FUND, INC.
Date:_____________________ By: _________________________
Authorized Officer
Accepted and Agreed to:
Name of Entity (Please Print or Type)
Address: -----------------------
-----------------------
-----------------------
Date: By:
Authorized Officer
|
Gentlemen:
THE RBB FUND, INC.
103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19803
SHAREHOLDER SERVICING AGREEMENT
(Sansom Street Tax-Free Money Shares)
We wish to enter into this Shareholder Servicing Agreement with you concerning the provision of support services to your clients ("Clients") who may from time to time beneficially own shares of Class J Common Stock, Par Value $.001 Per Share ("Class J Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide any or all of the following support services to Clients who may from time to time beneficially own Class J Shares: (i) aggregating and processing purchase and redemption requests for Class J Shares from Clients and placing net purchase and redemption orders with our transfer agent, Provident Financial Processing Corporation; (ii) providing Clients with a service that invests the assets of their accounts in Class J Shares pursuant to specific or pre-authorized instructions; (iii) processing dividend payments from us on behalf of Clients; (iv) providing information periodically to Clients showing their positions in Class J Shares; (v) arranging for bank wires; (vi) responding to Client inquiries relating to the services performed by you; (vii) providing subaccounting with respect to Class J Shares beneficially owned by Clients or the information to us necessary for subaccounting; (viii) if required by law, forwarding shareholder communications from us (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to Clients; and (ix) providing such other similar services as we may reasonably request to the extent you are permitted to do so under applicable statutes, rules or regulations.
Section 2. You represent that: (a) you will provide to your Clients a schedule of any fees charged by you to your Clients in connection with the investment of their assets in Class J Shares; (b) you will retain payments received by you hereunder only if an investment in Class J Shares has been authorized by your Clients; and (c) the compensation paid to you hereunder will not be excessive or unreasonable.
Section 3. You will provide such office space and equipment, telephone facilities and personnel (which may be any part of the space, equipment and facilities currently used in your business, or any personnel employed by you) as may be reasonably necessary or beneficial in order to provide the aforementioned services to Clients.
Section 4. Neither you nor any or your officers, employees or agents are authorized to make any representations concerning us or Class J Shares except those contained in our then current prospectus for such Class J Shares, copies of which will be supplied by us, or caused to be supplied by Planco Financial Services, Inc. ("Planco"), to you, or in such supplemental literature or advertising as may be authorized by us in writing.
Section 5. 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 Planco in any matter or in any respect. By your written acceptance of this Agreement, you agree to and do release, indemnify and hold us harmless from and against any and all direct or indirect liabilities or losses resulting from requests, directions, actions or inactions of or by you or your officers, employees or agents regarding your responsibilities hereunder or the purchase, redemption, transfer or registration of Class J Shares by or on behalf of Clients. You and your employees will, upon request, be available during normal business hours to consult with us or our designees concerning the performance of your responsibilities under this Agreement.
Section 6. In consideration of the services and facilities provided by you hereunder, we will pay to you, and you will accept as full payment therefor, a fee at the annual rate of .10% of the average daily net asset value of the Class J Shares held of record by you from time to time on behalf of Clients (the "Clients' Class J Shares"), which fee will be computed daily and payable monthly. For purposes of determining the fees payable under this Section 6, the average daily net asset value of the Clients' Class J Shares will be computed in the manner specified in our registration statement (as the same is in effect from time to time) in connection with the computation of the net asset value of Class J Shares for purposes of purchases and redemptions. The fee rate stated above may be prospectively increased or decreased by us, in our sole discretion, at any time upon notice to you. You hereby agree, pursuant to and so long as our order of exemption from Section 18 of the Investment Company Act of 1940 relating to multiple classes of shares in an investment portfolio is in effect, to waive your fee hereunder on any day to the extent necessary to ensure that the fee required to be accrued does not exceed the income accrued by the Class J Shares on such day. Further, we may, in our discretion and without notice, suspend or withdraw the sale of Class J Shares, including the sale of such shares to you for the account of any Client or Clients.
Section 7. Any person authorized to direct the disposition of monies paid or payable by us pursuant to this Agreement will provide to our Board of Directors, and our Directors will review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. In addition, you will furnish us or our designees with such information as we or they may reasonably request (including, without limitation, periodic certifications confirming the provision to Clients of the services described herein), and will otherwise cooperate with us and our designees (including, without limitation, any auditors designated by us), in connection with the preparation of reports to our Board of Directors concerning this Agreement and the monies paid or payable by us pursuant hereto, as well as any other reports or filings that may be required by law.
Section 8. We may enter into other similar Shareholder Servicing Agreements with any other person or persons without your consent.
Section 9. By your written acceptance of this Agreement, you represent, warrant and agree that in no event will any of the services provided by you hereunder be primarily intended to result in the sale of any shares issued by us.
Section 10. This Agreement will become effective on the date a fully executed copy of this Agreement is received by us or our designee. Unless sooner terminated, this Agreement will continue until August 16, 1989, and thereafter will continue automatically for successive annual periods ending on August 16, provided such continuance is specifically approved at least annually by us in the manner described in Section 13 hereof. This Agreement is terminable, without penalty, at any time by us (which termination may be by vote of a majority of our Disinterested Directors as defined in Section 13 hereof) or by you upon notice to the other party herein.
Section 11. All notices and other communications to either you or us will be duly given if mailed, telegraphed, telexed or transmitted by similar telecommunications device to the appropriate address shown herein.
Section 12. This Agreement will be construed in accordance with the laws of the State of Maryland and is non-assignable by the parties hereto.
Section 13. The form of this Agreement has been approved by vote of a majority of (i) our Board of Directors and (ii) those Directors who are not "interested persons" (as defined in the Investment Company Act of 1940) of us and have no direct or indirect financial interest in the operation of the Shareholder Services Plan adopted by us regarding the provision of support services to the beneficial owners of Class J Shares or in any agreements related thereto ("Disinterested Directors"), cast in person at a meeting called for the purpose of voting on such approval.
If you agree to be legally bound by the provisions of this Agreement, please sign a copy of this letter where indicated below and promptly return it to us, c/o Planco Financial Services, Inc., 16 Industrial Boulevard, Paoli, Pennsylvania 19301.
Very truly yours,
THE RBB FUND, INC.
Date: ______________ By: _____________________________
Authorized Officer
Accepted and Agreed to:
Name of Entity (Please Print or Type)
Address: -----------------------
-----------------------
-----------------------
Date: ______________ By: _____________________________
Authorized Officer
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Exhibit 9(e)
THE RBB FUND, INC
103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19803
SHAREHOLDER SERVICING AGREEMENT
(Sansom Street Government Shares)
Gentlemen:
We wish to enter into this Shareholder Servicing Agreement with you concerning the provision of support services to your clients ("Clients") who may from time to time beneficially own shares of Class K Common Stock, Par Value $.001 Per Share ("Class K Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide any or all of the
following support services to Clients who may from time to time beneficially own
Class K Shares: (i) aggregating and processing purchase and redemption requests
for Class K Shares from Clients and placing net purchase and redemption orders
with our transfer agent, Provident Financial Processing Corporation; (ii)
providing Clients with a service that invests the assets of their accounts in
Class K Shares pursuant to specific or pre-authorized instructions; (iii)
processing dividend payments from us on behalf of Clients; (iv) providing
information periodically to Clients showing their positions in Class K Shares;
(v) arranging for bank wires; (vi) responding to Client inquiries relating to
the services performed by you; (vii) providing subaccounting with respect to
Class K Shares beneficially owned by Clients or the information to us necessary
for subaccounting; (viii) if required by law, forwarding shareholder
communications from us (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
Clients; and (ix) providing such other similar services as we may reasonably
request to the extent you are permitted to do so under applicable statutes,
rules or regulations.
Section 2. You represent that: (a) you will provide to your Clients a schedule of any fees charged by you to your Clients in connection with the investment of their assets in Class K Shares; (b) you will retain payments received by you hereunder only if an investment in Class K Shares has been authorized by your Clients; and (c) the compensation paid to you hereunder will not be excessive or unreasonable.
Section 3. You will provide such office space and equipment, telephone facilities and personnel (which may be any part of the space, equipment and facilities currently used in your business, or any personnel employed by you) as may be reasonably necessary or beneficial in order to provide the aforementioned services to Clients.
Section 4. Neither you nor any or your officers, employees or agents are authorized to make any representations concerning us or Class K Shares except those contained in our then current prospectus for such Class K Shares, copies of which will be supplied by us, or caused to be supplied by Planco Financial Services, Inc. ("Planco"), to you, or in such supplemental literature or advertising as may be authorized by us in writing.
Section 5. 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 Planco in any matter or in any respect. By your written acceptance of this Agreement, you agree to and do release, indemnify and hold us harmless from and against any and all direct or indirect liabilities or losses resulting from requests, directions, actions or inactions of or by you or your officers, employees or agents regarding your responsibilities hereunder or the purchase, redemption, transfer or registration of Class K Shares by or on behalf of Clients. You and your employees will, upon request, be available during normal business hours to consult with us or our designees concerning the performance of your responsibilities under this Agreement.
Section 6. In consideration of the services and facilities provided by you hereunder, we will pay to you, and you will accept as full payment therefor, a fee at the annual rate of .10% of the average daily net asset value of the Class K Shares held of record by you from time to time on behalf of Clients (the "Clients' Class K Shares"), which fee will be computed daily and payable monthly. For purposes of determining the fees payable under this Section 6, the average daily net asset value of the Clients' Class K Shares will be computed in the manner specified in our registration statement (as the same is in effect from time to time) in connection with the computation of the net asset value of Class K Shares for purposes of purchases and redemptions. The fee rate stated above may be prospectively increased or decreased by us, in our sole discretion, at any time upon notice to you. You hereby agree, pursuant to and so long as our order of exemption from Section 18 of the Investment Company Act of 1940 relating to multiple classes of shares in an investment portfolio is in effect, to waive your fee hereunder on any day to the extent necessary to ensure that the fee required to be accrued does not exceed the income accrued by the Class K Shares on such day. Further, we may, in our discretion and without notice, suspend or withdraw the sale of Class K Shares, including the sale of such shares to you for the account of any Client or Clients.
Section 7. Any person authorized to direct the disposition of monies paid or payable by us pursuant to this Agreement will provide to our Board of Directors, and our Directors will review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. In addition, you will furnish us or our designees with such information as we or they may reasonably request (including, without limitation, periodic certifications confirming the provision to Clients of the services described herein), and will otherwise cooperate with us and our designees (including, without limitation, any auditors designated by us), in connection with the preparation of reports to our Board of Directors concerning this Agreement and the monies paid or payable by us pursuant hereto, as well as any other reports or filings that may be required by law.
Section 8. We may enter into other similar
Shareholder Servicing Agreements with any other person or persons without your
consent.
Section 9. By your written acceptance of this
Agreement, you represent, warrant and agree that in no event will any of the
services provided by you hereunder be primarily intended to result in the sale
of any shares issued by us.
Section 10. This Agreement will become effective on
the date a fully executed copy of this Agreement is received by us or our
designee. Unless sooner terminated, this Agreement will continue until August
16, 1989, and thereafter will continue automatically for successive annual
periods ending on August 16, provided such continuance is specifically approved
at least annually by us in the manner described in Section 13 hereof. This
Agreement is terminable, without penalty, at any time by us (which termination
may be by vote of a majority of our Disinterested Directors as defined in
Section 13 hereof) or by you upon notice to the other party herein.
Section 11. All notices and other communications to either you or us will be duly given if mailed, telegraphed, telexed or transmitted by similar telecommunications device to the appropriate address shown herein.
Section 12. This Agreement will be construed in accordance with the laws of the State of Maryland and is non-assignable by the parties hereto.
Section 13. The form of this Agreement has been approved by vote of a majority of (i) our Board of Directors and (ii) those Directors who are not "interested persons" (as defined in the Investment Company Act of 1940) of us and have no direct or indirect financial interest in the operation of the Shareholder Services Plan adopted by us regarding the provision of support services to the beneficial owners of Class K Shares or in any agreements related thereto ("Disinterested Directors"), cast in person at a meeting called for the purpose of voting on such approval.
If you agree to be legally bound by the provisions of this Agreement, please sign a copy of this letter where indicated below and promptly return it to us, c/o Planco Financial Services, Inc., 16 Industrial Boulevard, Paoli, Pennsylvania 19301.
Very truly yours,
THE RBB FUND, INC.
Date: By:
Authorized Officer
Accepted and Agreed to:
Name of Entity (Please Print or Type)
Address
Date: By:
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Officer
Exhibit 9(f)
NON-12b-l SHAREHOLDER SERVICES PLAN
OF
THE RBB FUND, INC.
(Sansom Street Money Shares)
Section 1. Upon the recommendation of Planco Financial Services, Inc., the distributor (the "Distributor") of shares of Class I Common Stock of The RBB Fund, Inc., par value $.001 per share (the "Class 1 Shares"), any officer of The RBB Fund, Inc. (the "Fund") is authorized to execute and deliver. in the name and on behalf of the Fund, written agreements, in substantially the form attached hereto or in any other form duly approved by the Fund's Board of Directors ("Servicing Agreements"), with shareholders of-record, other than broker/dealers, that are banks that are affiliated with PNC Financial Corp ("Service organizations") of the Fund's Class 1 Shares. Such Servicing Agreements shall require the Service Organizations to provide certain support services on behalf of the Fund as set forth therein to their clients who beneficially own Class 1 Shares in consideration of a fee, computed daily and paid monthly in the manner set forth in the Servicing Agreements, at the annual rate not to exceed .25% of the average daily not asset value of Class I Shares held by the Service Organizations on behalf of their clients. All expenses incurred by the Fund in connection with the Servicing Agreements and the implementation of this Non-12b-1 Shareholder Services Plan ("Plan") shall be borne entirely by the holders of Class I Shares.
Section 2. The Distributor shall monitor the arrangements pertaining to the Fund's Servicing Agreements with Service Organizations in accordance with the terms of the Distributor's distribution agreement with the Fund pertaining to Class I Shares. The Distributor shall not, however, be obligated by this Plan to recommend, and the Fund shall not be obligated to execute, any Servicing Agreement with any Service Organization.
Section 3. So long as this Plan is in effect, the Distributor shall provide to the Fund's Board of Directors, and the 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.
Section 4. This Plan shall become effective an of August 16, 1988 upon the approval of the Plan (and the form of Servicing Agreement attached hereto) by a majority of the Fund's Directors who are not "interested persons" as defined in the Investment Company Act of 1940 (the "Act") of the Fund and have no direct or indirect financial interest in the operation of this Plan or in any Servicing Agreements or other agreements related to this Plan (the "Disinterested Directors"), pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of this Plan (and form of Servicing Agreement.)
Section S. Unless sooner terminated. this Plan shall continue until August 16, 1969, and thereafter shall continue automatically for successive annual periods ending on August 16, provided such continuance is approved at least annually in the manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Fund's Board of Directors, provided that any material amendments of the terms of this Plan shall become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a majority of the Disinterested Directors.
Section 8. While this Plan is in effect, the selection and nomination of those Directors who are not "interested persons" (as defined in the Act) of the Fund shall be committed to the discretion of such Directors who are not "interested persons" (as defined in the Act) of the Fund.
Section 9. The Fund has adopted this Non-12b-l Shareholder Services Plan as of August 16, 1988.
Exhibit 9(g)
NON-12b-1 SHAREHOLDER SERVICES PLAN
OF
THE RBB FUND, INC.
(Sansom Street Tax-Free Money Shares)
Section 1. Upon the recommendation of Planco Financial Services, Inc., the distributor (the "Distributor") of shares of Class J Common Stock of The RBB Fund, Inc., par value $.001 per share (the "Class J Shares"), any officer of The RBB Fund, Inc. (the "Fund") is authorized to execute and deliver, in the name and on behalf of the Fund, written agreements, in substantially the form attached hereto or in any other form duly approved by the Fund's Board of Directors ("Servicing Agreements"), with shareholders of record, other than broker/dealers, that are banks that are affiliated with PNC Financial Corp ("Service Organizations") of the Fund's Class J Shares. Such Servicing Agreements shall require the Service Organizations to provide certain support services on behalf of the Fund as set forth therein to their clients who beneficially own Class J Shares in consideration of a fee, computed daily and paid monthly in the manner set forth in the Servicing Agreements, at the annual rate not to exceed .25% of the average daily net asset value of Class J Shares held by the Service Organizations on behalf of their clients. All expenses incurred by the Fund in connection with the Servicing Agreements and the implementation of this Non-12b-1 Shareholder Services Plan ("Plan") shall be borne entirely by the holders of Class J Shares.
Section 2. The Distributor shall monitor the arrangements pertaining to the Fund's Servicing Agreements with Service Organizations in accordance with the terms of the Distributor's distribution agreement with the Fund pertaining to Class J Shares. The Distributor shall not, however, be obligated by this Plan to recommend, and the Fund shall not be obligated to execute, any Servicing Agreement with any Service Organization.
Section 3. So long as this Plan is in effect, the Distributor shall provide to the Fund's Board of Directors, and the 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.
Section 4. This Plan shall become effective as of August 16, 1988 upon the approval of the Plan (and the form of Servicing Agreement attached hereto) by a majority of the Funds Directors who are not "interested persons" as defined in the Investment Company Act of 1940 (the "Act") of the Fund and have no direct or indirect financial interest in the operation of this Plan or in any Servicing Agreements or other agreements related to this Plan (the "Disinterested Directors"), pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of this Plan (and form of Servicing Agreement.)
Section 5. Unless sooner terminated, this Plan shall continue until August 16, 1989, and thereafter shall continue automatically for successive annual periods ending on August 16, provided such continuance is approved at least annually in the manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Fund's Board of Directors, provided that any material amendments of the terms of this Plan shall become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a majority of the Disinterested Directors.
Section 8. While this Plan is in effect, the selection and nomination of those Directors who are not "interested persons" (as defined in the Act) of the Fund shall be committed to the discretion of such Directors who are not "interested persons" (as defined in the Act) of the Fund.
Section 9. The Fund has adopted this Non-12b-1 Shareholder Services Plan as of August 16, 1988.
Exhibit 9(h)
NON-12b-1 SHAREHOLDER SERVICES PLAN
OF
THE RBB FUND, INC.
(Sansom Street Government Shares)
Section 1. Upon the recommendation of Planco Financial Services, Inc., the distributor (the "Distributor") of shares of Class K Common Stock of The RBB Fund, Inc, par value $.001 per share (the "Class K Shares"), any officer of The RBB Fund, Inc. (the "Fund") is authorized to execute and deliver, in the name and on behalf of the Fund, written agreements, in substantially the form attached hereto or in any other form duly approved by the Fund's Board of Directors ("Servicing Agreements"), with shareholders of record, other than broker/dealers, that are banks that are affiliated with PNC Financial Corp ("Service Organizations") of the Fund's Class K Shares. Such Servicing Agreements shall require the Service Organizations to provide certain support services on behalf of the Fund as set forth therein to their clients who beneficially own Class K Shares in consideration of a fee, computed daily and paid monthly in the manner set forth in the Servicing Agreements, at the annual rate not to exceed .25% of the average daily net asset value of Class K Shares held by the Service Organizations on behalf of their clients. All expenses incurred by the Fund in connection with the Servicing Agreements and the implementation of this Non-12b-1 Shareholder Services Plan ("Plan") shall be borne entirely by the holders of Class K Shares.
Section 2. The Distributor shall monitor the arrangements pertaining to the Fund's Servicing Agreements with Service Organizations in accordance with the terms of the Distributor's distribution agreement with the Fund pertaining to Class K Shares. The Distributor shall not, however, be obligated by this Plan to recommend, and the Fund shall not be obligated to execute, any Servicing Agreement with any Service Organization.
Section 3. So long as this Plan is in effect, the Distributor shall provide to the Fund's Board of Directors, and the 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.
Section 4. This Plan shall become effective as of August 16, 1988 upon the approval of the Plan (and the form of Servicing Agreement attached hereto) by a majority of the Fund's Directors who are not "interested persons" as defined in the Investment Company Act of 1940 (the "Act") of the Fund and have no direct or indirect financial interest in the operation of this Plan or in any Servicing Agreements or other agreements related to this Plan (the "Disinterested Directors"), pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of this Plan (and form of Servicing Agreement.)
Section 5. Unless sooner terminated, this Plan shall continue until August 16, 1989, and thereafter shall continue automatically for successive annual periods ending on August 16, provided such continuance is approved at least annually in the manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Fund's Board of Directors, provided that any material amendments of the terms of this Plan shall become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a majority of the Disinterested Directors.
Section 8. While this Plan is in effect, the selection and nomination of those Directors who are not "interested persons" (as defined in the Act) of the Fund shall be committed to the discretion of such Directors who are not "interested persons" (as defined in the Act) of the Fund.
Section 9. The Fund has adopted this Non-12b-1 Shareholder Services Plan as of August 16, 1988.
Exhibit 9(i)
TRANSFER AGENCY AGREEMENT
(Bedford Classes)
THIS AGREEMENT is made as of August 16, 1988 between THE RBB FUND, INC., a Maryland corporation (the "Fund"), and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent") which is an indirect, wholly-owned subsidiary of PNC Financial Corp.
R E C I T A L
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 desires to retain the Transfer Agent to serve as the Fund's transfer agent, registrar, and dividend disbursing agent with respect to Shares of its Class L, Class M and Class N Common Stock (the "Bedford Classes"), par value $.001 per share, and the Transfer Agent 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 the Transfer Agent to serve as transfer agent, registrar and dividend disbursing agent for the Fund for the period and on the terms set forth in this Agreement with respect to shares of the Bedford Classes (the "Shares"). The Transfer Agent shall identify to each Bedford Class, or any additional class hereafter created that is designated by the Fund as a Bedford Class, property belonging to such Bedford Class and in such reports, confirmations and notices to the Fund called for under this Agreement shall identify the Bedford Class to which such report, confirmation or notice pertains. The Transfer Agent accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Paragraph 16 of this Agreement.
2. Delivery of Documents. The Fund has furnished the Transfer Agent with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the appointment of the Transfer Agent as transfer agent and registrar and dividend disbursing agent for the Bedford Classes and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Fund's officers and other persons authorized to issue Oral Instructions and to sign Written Instructions, as hereinafter defined, on behalf of the Fund and to execute stock certificates representing Shares;
(c) The Fund's Articles of Incorporation filed with the Department of Assessments and Taxation of the State of Maryland on February 29, 1988 and all amendments thereto (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, are herein called the "Charter");
(d) The Fund's Articles Supplementary filed with the Department of Assessments and Taxation of the State of Maryland on March 24, 1988, and all further Articles Supplementary filed with the State of Maryland (the "Articles Supplementary");
(e) The Fund's By-Laws and all amendments thereto (such By-Laws, as presently in effect and as they shall from time to time be amended, are herein called the "By-Laws");
(f) Copies of all documents relating to any voluntary investor service plans sponsored by the Fund;
(g) Each Investment Advisory and Administration Agreement between Provident Institutional Management Corporation (the "Advisor") and the Fund relating to a Bedford Class (collectively, the "Advisory Agreements") and each Sub-Advisory Agreement between Provident National Bank (which in its capacity as Sub-Advisor is hereinafter referred to as the "Sub-Advisor") and the Advisor relating to a Bedford Class (collectively with the Advisory Agreements, the "Advisory Contracts");
(h) The Custodian Agreement between Provident National Bank (which in its capacity as custodian is hereinafter referred to as the "Custodian") and the Fund dated as of August 16, 1988 (the "Custodian Agreement");
(i) Each Distribution Agreement between Planco Financial Services, Inc. (the "Distributor") and the Fund with respect to any Bedford Class (collectively, the "Distribution Agreements") and the form of each related Dealer Agreement for broker-dealers participating in the distribution of any Bedford Class ("Participating Dealers");
(j) Each Plan of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940 with respect to a Bedford Class (collectively, the "Distribution Plans");
(k) Each Shareholder Servicing Agreement, if any, with respect to a Bedford Class (collectively, the "Shareholder Servicing Agreements");
(1) Each Non-12b-l Shareholder Services Plan, any, with respect to a Bedford Class (collectively, the "Shareholder Services Plans");
(m) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission ("SEC") on March 24, 1988;
(n) The Fund's most recent Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-20827) and under the 1940 Act as filed with the SEC on March 24, 1988 relating to the Shares, and all amendments thereto;
(o) The Fund's most recent prospectuses relating to any of the Shares (each such prospectus, as presently in effect and all amendments and supplements thereto herein called a "Prospectus"); and
(p) Before the Fund engages in any transactions regulated by the Commodity Futures Trading Commission ("CFTC"), a copy of either (i) a filed notice of eligibility to claim the exclusion from the definition of "commodity pool operator" contained in Section 2(a)(1)(A) of the ("CEA") that is provided in Rule 4.5 under the CEA, together with all supplements as are required by the CFTC, or (ii) a letter which has been granted the Fund by the CFTC which states that the Fund will not be treated as a "pool" as defined in Section 4.10(d) of the CFTC's General Regulations, or (iii) a letter which has been granted the Fund by the CFTC which states that the CFTC will not take any enforcement action if the Fund does not register as a "commodity pool operator."
The Fund will furnish the Transfer Agent from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term "Authorized Person" means any officer of the Fund and any other person, whether or not any such person is an officer or employee of the Fund, duly authorized by the Board of Directors of the Fund to give Oral and Written Instructions on behalf of the Fund and listed on the Certificate annexed hereto as Appendix A or any amendment thereto as may be received by the Transfer Agent from time to time.
(b) "Oral Instructions". As used in this Agreement, the term "Oral Instructions" means oral instructions actually received by the Transfer Agent from an Authorized Person or from a person reasonably believed by the Transfer Agent to be an Authorized Person. The Fund agrees to deliver to the Transfer Agent, at the time and in the manner specified in Paragraph 4(b) of this Agreement, Written Instructions confirming Oral Instructions.
(c) "Written Instructions". As used in this Agreement, the term "Written Instructions" means written instructions delivered by hand, mail, tested telegram, cable, telex or facsimile sending device, and received by the Transfer Agent and signed by an Authorized Person.
4. Instructions Consistent with Charter and By-Laws.
(a) Unless otherwise provided in this Agreement, the Transfer Agent shall act only upon Oral or Written Instructions. Although the Transfer Agent may know of the provisions of the Charter and By-Laws of the Fund, the Transfer Agent may assume that any Oral or Written Instructions received hereunder are not in any way inconsistent with any provisions of such Charter or By-Laws or any vote, resolution or proceeding of the Shareholders, or of the Board of Directors, or of any committee thereof.
(b) The Transfer Agent shall be entitled to rely upon any Oral Instructions and any Written Instructions actually received by the Transfer Agent pursuant to this Agreement. The Fund agrees to forward to the Transfer Agent Written Instructions confirming Oral Instructions in such manner that the Written Instructions are received by the Transfer Agent by the close of business of the same day that such Oral Instructions are given to the Transfer Agent. The Fund agrees that the fact that such confirming Written Instructions are not received by the Transfer Agent shall in no way affect the validity of the transactions or enforceability of the transactions authorized by the Fund by giving Oral Instructions. The Fund agrees that the Transfer Agent shall incur no liability to the Fund in acting upon Oral Instructions given to the Transfer Agent hereunder concerning such transactions, provided such instructions reasonably appear to have been received from an Authorized Person.
5. Transactions Not Requiring Instructions. In the absence of contrary Written Instructions, the Transfer Agent is authorized to take the following actions:
(a) Issuance of Shares. Upon receipt of a purchase order from or on behalf of an investor for the purchase of Shares and sufficient information, including a completed application to purchase ("Application"), to enable the Transfer Agent to establish a Shareholder account and to determine which Class of Shares the investor wishes to purchase, and after confirmation of receipt of or crediting of Federal funds for such order from the Fund's Custodian, receipt by the Transfer Agent of a check payable to the Transfer Agent for such order, the Transfer Agent shall issue and credit the account of the investor or other record holder with Shares in the manner described in the Prospectus relating to such Shares.
(b) Transfer of Shares; Uncertificated Securities. Where a Shareholder does not hold a certificate representing the number of Shares in his account and does provide the Transfer Agent with instructions for the transfer of such Shares and such other appropriate documentation to permit a transfer as specified in the Prospectus relating to such Shares, then the Transfer Agent shall register such Shares and shall deliver them pursuant to instructions received from the transferor, pursuant to the rules of the exchange upon which Shares are listed (if any), the rules and regulations of the SEC, and the law of the State of Maryland relating to the transfer of shares of common stock.
(c) Stock Certificates. If at any time the Fund issues stock certificates with respect to any Bedford Class of Shares, the following provisions will apply with respect to such Bedford Class of Shares:
(i) The Fund will supply the Transfer Agent with a sufficient supply of stock certificates representing such class of Shares, in the form approved from time to time by the Board of Directors of the Fund, and, from time to time, shall replenish such supply upon request of the Transfer Agent. Such stock certificates shall be properly signed, manually or by facsimile signature, by the duly authorized officers of the Fund, whose names and positions shall be set forth on Appendix B, and shall bear the corporate seal or facsimile thereof of the Fund, and notwithstanding the death, resignation or removal of any officer of the Fund, such executed certificates bearing the manual or facsimile signature of such officer shall remain valid and may be issued to Shareholders until the Transfer Agent is otherwise directed by Written Instructions.
(ii) In the case of the loss or destruction of any certificate representing any class of Shares, no new certificate shall be issued in lieu thereof, unless there shall first have been furnished an appropriate bond of indemnity issued by the surety company approved by the Transfer Agent.
(iii) Upon receipt of signed stock certificates, which shall be in proper form for transfer, and upon cancellation or destruction thereof, the Transfer Agent shall countersign, register and issue new certificates for the same number of such class of Shares and shall deliver them pursuant to instructions received from the transferer, the rules and regulations of the SEC, and the law of the State of Maryland relating to the transfer of shares of common stock.
(iv) Upon receipt of the stock certificates, which shall be in proper form for transfer, together with the Shareholder's instructions to hold such stock certificates for safekeeping, the Transfer Agent shall reduce such Shares to uncertificated status, while retaining the appropriate registration in the name of the Shareholder upon the transfer books.
(v) Upon receipt of written instructions from a Shareholder of uncertificated securities for a certificate in the number of Shares in his account, the Transfer Agent will issue such stock certificates and deliver them to the Shareholder.
(d) Redemption of Shares. Upon receipt of a redemption order from a Shareholder in the manner and form specified in the Prospectus relating to such Shares, the Transfer Agent shall redeem the number of Shares so indicated from the redeeming Shareholder's account and receive from the Fund's Custodian and disburse to the redeeming Shareholder or Shareholder account as designated in the Application the redemption proceeds therefor or, in the case of a redemption check, to the party presenting such check for payment in accordance with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian.
6. Authorized Shares. The Fund's authorized capital stock
consists of ten billion (10,000,000,000) shares of Common Stock, par value $.001
per share, of which: 100 million (100,000,000) Shares constitute the Class A
Shares, 100 million (100,000,000) Shares constitute the Class B Shares, 100
million (100,000,000) Shares constitute the Class C Shares, 100 million
(100,000,000) Shares constitute the Class D Shares, 500 million (500,000,000)
Shares constitute the Class E Shares, 500 million (500,000,000) Shares
constitute the Class F Shares, 500 million (500,000,000) Shares constitute the
Class G Shares, 500 million (500,000,000) Shares constitute the Class H Shares,
500 million (500,000,000) Shares constitute the Class I Shares, 500 million
(500,000,000) Shares constitute the Class J Shares, 500 million (500,000,000)
Shares constitute the Class K Shares, 500 million (500,000,000) Shares
constitute the Class L Shares, 500 million (500,000,000) Shares constitute the
Class M Shares, and 500 million (500,000,000) Shares constitute the Class N
Shares. The Fund may from time to time authorize the issuance of additional
shares of its Common Stock, issue additional series or classes of shares of its
Common Stock or classify and reclassify shares of such series or class and shall
notify the Transfer Agent of any such authorization, issuance, classification or
reclassification. The Fund agrees to notify the Transfer Agent promptly of any
change in the number of authorized Shares of any Bedford Class and of any change
in the number of Shares registered under the 1933 Act. The Transfer Agent shall
record issues of all Shares and shall notify the Fund in case any proposed issue
of Shares by the Fund shall result in an over-issue, in which case the Transfer
Agent shall refuse to issue said Shares and shall not countersign and issue
certificates for such Shares.
7. Dividends and Distributions. The Fund shall furnish the Transfer Agent with appropriate evidence of action by the Fund's Board of Directors authorizing the declaration and payment of dividends and distributions as described in the Prospectuses. After deducting any amount required to be withheld by any applicable tax laws, rules and regulations or other applicable laws, the Transfer Agent shall in accordance with the instructions in proper form from a Shareholder and the provisions of the Fund's Charter and applicable Prospectus, pay such dividends to the Shareholders in the manner described in the applicable Prospectus. In lieu of receiving from the Fund's Custodian and paying to Shareholders cash dividends or distributions, the Transfer Agent may arrange for the direct payment of cash dividends and distributions to Shareholders by the Fund's Custodian, in accordance with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian.
The Transfer Agent shall prepare, file with the Internal Revenue Service and other appropriate taxing authorities, and address and mail to Shareholders such returns and information relating to dividends and distributions paid by the Fund as are required to be so prepared, filed and mailed by applicable laws, rules and regulations, or such substitute form of notice as may from time to time be permitted or required by the Internal Revenue Service. On behalf of the Fund, the Transfer Agent shall mail certain requests for Shareholders' certifications under penalties of perjury and pay on a timely basis to the appropriate Federal authorities any taxes to be withheld on dividends and distributions paid by the Fund, all as required by applicable Federal tax laws and regulations.
In accordance with the applicable Prospectus and such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian, the Transfer Agent shall (a) arrange for issuance of Shares obtained through (1) transfers of funds from Shareholders' accounts at financial institutions, (2) the Fund's pre-authorized check plan, and (3) the Fund's right of accumulation plan; (4) the Fund's automatic investing program; (b) arrange for the exchange of Shares of a class or series of the Fund having an exchange privilege for Shares of other classes or series of the Fund to which such exchange privilege extends; and (c) arrange for systematic withdrawals from the account of a Shareholder participating in the Fund's systematic withdrawal program.
8. Communications with Shareholders.
(a) Communications to Shareholders. The Transfer Agent will address and mail all communications by the Fund to its Shareholders, including reports to Shareholders, confirmations of purchases and sales of Shares, monthly statements, year-end federal tax information, dividend and distribution notices and proxy material for its meetings of Shareholders. The Transfer Agent will receive and tabulate the proxy cards for the meetings of the Fund's Shareholders.
(b) Correspondence. The Transfer Agent will answer such correspondence from Shareholders, securities brokers and others relating to its duties hereunder and such other correspondence as may from time to time be mutually agreed upon between the Transfer Agent and the Fund.
9. Records. The Transfer Agent shall maintain records of the accounts for each Shareholder showing the following information:
(a) name, address and United States Tax Identification or Social Security number;
(b) number and Bedford Class of Shares held and number and Bedford Class of Shares for which certificates, if any, have been issued, including certificate numbers and denominations;
(c) historical information regarding the account of each Shareholder, including dividends and distributions paid and the date and price for all transactions on a Shareholder's account;
(d) any stop or restraining order placed against a Shareholder's account;
(e) any correspondence relating to the current maintenance of a Shareholder's account; and,
(f) information with respect to withholdings;
(g) any information required in order for the Transfer Agent to perform any calculations contemplated or required by this Agreement.
The Transfer Agent shall keep a record of all redemption checks and dividend checks returned by postal authorities, and shall maintain such records as are required for the Fund to comply with the escheat laws of any State or other authority.
The books and records pertaining to the Fund which are in the possession of the Transfer Agent 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 and shall, to the extent practicable, be maintained separately for each portfolio of the Fund. The Fund, or the Fund's authorized representatives, shall have access to such books and records at all times during the Transfer Agent's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Transfer Agent to the Fund or the Fund's authorized representative at the Fund's expense.
10. Ongoing Functions. The Transfer Agent will perform the following functions on an ongoing basis:
(a) furnish daily reports of transactions in Shares;
(b) furnish monthly reports of transactions in Fund Shares by type (Keogh, IRA, other) including numbers accounts;
(c) furnish state-by-state blue sky registration reports to the Fund;
(d) calculate sales load or compensation payment, if applicable, and provide such information to the Fund;
(e) calculate dealer commissions for the Fund, as applicable;
(f) provide toll-free lines for direct Shareholder use, plus customer liaison staff with on-line inquiry capacity;
(g) mail duplicate confirmations to dealers of their clients' activity, whether executed through the dealer or directly with the Transfer Agent;
(h) provide detail for underwriter or broker confirmations and other participating dealer Shareholder accounting, in accordance with such procedures as may be agreed upon between the Fund and the Transfer Agent;
(i) provide Shareholder lists and statistical information concerning accounts to the Fund; and
(j) provide timely notification of Fund activity and such other information as may be agreed upon from time to time between the Transfer Agent and the Fund Custodian, to the Fund or the Custodian.
11. Cooperation with Accountants. The Transfer Agent shall cooperate with the Fund's independent public accountants and shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion as such may be required by the Fund from time to time.
12. Confidentiality. The Transfer Agent agrees on behalf of itself and its employees to treat confidentially all records and other information relative to the Fund and its prior, present or potential Shareholders, 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 Transfer Agent 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.
13. Equipment Failures. In the event of equipment failures beyond the Transfer Agent's control, the Transfer Agent shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no liability with respect thereto. The foregoing obligation shall not extend to computer terminals located outside of premises maintained by the Transfer Agent. The Transfer Agent shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available.
14. Right to Receive Advice.
(a) Advice of Fund. If the Transfer Agent shall be in doubt as to any action to be taken or omitted by it, it may request, and shall receive, from the Fund directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If the Transfer Agent shall be in doubt as to any question of law involved in any action to be taken or omitted by the Transfer Agent, it may request advice at its own cost from counsel of its own choosing (who may be counsel for the Advisor, the Fund or the Transfer Agent at the option of the Transfer Agent).
(c) Conflicting Advice. In case of conflict between directions, advice or Oral or Written Instructions received by the Transfer Agent pursuant to subparagraph (a) of this Paragraph and advice received by the Transfer Agent pursuant to subparagraph (b) of this Paragraph, the Transfer Agent shall be entitled to rely on and follow the advice received pursuant to the latter provision alone.
(d) Protection of the Transfer Agent. The Transfer Agent shall be protected in any action or inaction which it takes in reliance on any directions, advice or Oral or Written Instructions received pursuant to subparagraphs (a) or (b) of this Paragraph which the Transfer Agent, after receipt of any such directions, advice or Oral or Written Instructions, in good faith believes to be consistent with such directions, advice or Oral or Written Instructions, as the case may be. However, nothing in this Paragraph shall be construed as imposing upon the Transfer Agent any obligation (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions when received, unless, under the terms of another provision of this Agreement, the same is a condition to the Transfer Agent's properly taking or omitting to take such action. Nothing in this subparagraph shall excuse the Transfer Agent when an action or omission on the part of the Transfer Agent constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by the Transfer Agent of its duties and obligations under this Agreement.
15. Compliance with Governmental Rules and Regulations. The Transfer Agent assumes no responsibility for insuring that the Fund complies with all applicable requirements of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act, the CEA, and any laws, rules and regulations of governmental authorities having jurisdiction.
16. Compensation. As compensation for the services rendered by the Transfer Agent during the term of this Agreement, the Fund will pay to the Transfer Agent, with respect to each Bedford Class of the Fund, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
17. Indemnification. The Fund agrees to indemnify and hold harmless the Transfer Agent and its nominees and sub-contractors from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, 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 the Transfer Agent takes or does or omits to take or do (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon Oral or Written Instructions, provided, that neither the Transfer Agent nor any of its nominees or sub-contractors shall be indemnified against any liability to the Fund or to its Shareholders (or any expenses incident to such liability) arising out of the Transfer Agent's or such nominee's or such sub-contractor's own willful misfeasance, bad faith or negligence or reckless disregard of its duties in connection with the performance of its duties and obligations specifically described in this Agreement.
18. Responsibility of the Transfer Agent. The Transfer Agent 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 the Transfer Agent in writing. In the performance of its duties hereunder, the Transfer Agent shall be obligated to exercise care and diligence and to act in good faith and to use its best efforts within reasonable limits to insure the accuracy and completeness of all services performed under this Agreement. The Transfer Agent shall be responsible for its own negligent failure to perform its duties under this Agreement, but to the extent that duties, obligations and responsibilities are not expressly set forth in this Agreement, the Transfer Agent shall not be liable for any act or omission which does not constitute willful misfeasance, bad faith or gross negligence on the part of the Transfer Agent or reckless disregard of such duties, obligations and responsibilities. Without limiting the generality of the foregoing or of any other provision of this Agreement, the Transfer Agent 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 Oral or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, if any, and which the Transfer Agent reasonably believes to be genuine, or (b) delays or errors or loss of data occurring by reason of circumstances beyond the Transfer Agent's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown (except as provided in Paragraph 13), flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply.
19. Duration and Termination. This Agreement shall continue until termination by the Fund or by the Transfer Agent on sixty (60) days written notice.
20. Registration as a Transfer Agent. The Transfer Agent represents that it is currently registered with the appropriate Federal agency for the registration of transfer agents, and that it will remain so registered for the duration of this Agreement. The Transfer Agent agrees that it will promptly notify the Fund in the event of any material change in its status as a registered transfer agent. Should the Transfer Agent fail to be registered with the SEC as a transfer agent at any time during this Agreement, the Fund may, on written notice to the Transfer Agent, immediately terminate this Agreement.
21. Notices. All notices and other communications, including Written Instructions (collectively referred to as "Notice" or "Notices" in this Paragraph), hereunder shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notices shall be addressed (a) if to the Transfer Agent at P. 0. Box 8950, Wilmington, Delaware 19899; (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 and the address of the addressee thereof are, at the time of sending, more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given five days after it is sent, or if sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately, and, if the location of the sender of a Notice and the address of the addressee thereof are, at the time of sending, not more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given three days after it is sent, or if 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. All postage, cable, telegram, telex and facsimile sending device charges arising from the sending of a Notice hereunder shall be paid by the sender.
22. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
23. 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.
24. Delegation of Duties.On thirty (30) days prior written notice
to the Fund, the Transfer Agent may assign its rights and delegate its duties
hereunder to any wholly-owned direct or indirect subsidiary of Provident
National Bank or PNC Financial Corp, provided that (i) the delegate agrees with
the Transfer Agent to comply with all relevant provisions of the 1940 Act; and
(ii) the Transfer Agent and such delegate shall promptly provide such
information as the Fund may request, and respond to such question as the Fund
may ask, relative to the delegation, including (without limitation) the
capabilities of the delegate. Upon such assignment and delegation, the Transfer
Agent shall be relieved of any further duties or obligations hereunder and from
any liability for any acts or failures to act occurring thereafter.
25. 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.
26. Miscellaneous. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties hereto may embody in one or more separate documents their agreement, if any, with respect to Oral Instructions. 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 Delaware and governed by Delaware 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written.
[ SEAL ]
THE RBB FUND, INC.
Attest:________________________________ By: /s/ Joe McKee Thomson
______________________
Joe McKee Thomson
[ SEAL ]
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PROVIDENT FINANCIAL
PROCESSING CORPORATION
Attest:________________________________ By: /s/ Morton B. Comer
_____________________
Morton S. Comer
|
APPENDIX A
Authorized Persons
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
______________________________________ ______________________________
(name) (signature)
APPENDIX B
Joe McKee Thomson
_______________________ ______________________________
President (signature)
Morgan R. Jones
_______________________ ______________________________
Secretary (signature)
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Exhibit 9(j)
ADMINISTRATION AND ACCOUNTING SERVICES
TERMS AND CONDITIONS
This Agreement is made as of April 10, 1991 by and between The RBB Fund, Inc., (the Fund) , a Maryland Corporation, and Provident Financial Processing Corporation ("PFPC"), a Delaware corporation which is an indirect wholly-owned subsidiary of PNC Financial Corp.
The Fund is registered as a open-end, non-diversified investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund wishes to retain PFPC to provide administration and accounting services to its Government Securities Portfolio, and PFPC wishes to furnish such services.
In consideration of the promises and mutual covenants herein contained, the parties agree as follows:
1. Definitions.
(a) "Authorized Person." The term "Authorized Person" shall mean any officer of the Fund and any other person, who is duly authorized by the Fund's Governing Board, to give oral and written Instructions on behalf of the Fund. Such persons are listed in the Certificate attached hereto as the Authorized Persons Appendix to this Agreement or such appendix may be amended in writing by the Fund's Governing Board from time to time. If Provident provides more than one service hereunder, the Fund's designation of Authorized Persons may vary by service.
(b) "Book-Entry System." The term "Book-Entry System" means Federal Reserve Treasury book-entry system for United States and federal agency securities, its successor or successors, and its nominee or nominees and any book-entry system maintained by an exchange registered with the SEC under the 1934 Act.
(c) "CFTC." The term "CFTC" shall mean the Commodities Futures Trading Commission.
(d) "Governing Board." The Term "Governing Board" shall mean the Fund's Board of Directors if the Fund is a corporation or the Fund's Board of Trustees if the Fund is a trust, or, where duly authorized, a competent committee thereof.
(e) "Oral Instructions." The term "Oral Instructions" shall mean oral instructions received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized Person.
(f) "Provident". The term "Provident" shall mean Provident National Bank or a subsidiary or affiliate of Provident National Bank.
(g) "SEC." The term "SEC" shall mean the Securities and Exchange Commission.
(h) "Securities and Commodities Laws." The terms the "1933 Act" shall mean the Securities Act of 1933, as amended, the "1934 Act" shall mean the Securities Exchange Act of 1934, as amended, the "1940 Act" shall mean the Investment Company Act 1940, as amended and the "CEA" shall mean the Commodities Exchange Act, as amended.
(i) "Services." The term "Services" shall mean the service provided to the Fund by PFPC.
(j) "Shares." The terms "Shares" shall mean the shares of stock of any series or class of the Fund, or, where appropriate, units of beneficial interest in a trust where the Fund is organized as a Trust.
(k) "Property." The term "Property" shall mean:
(i) any and all securities and other investment items which the Fund may from time to time deposit, or cause to be deposited, with PFPC or which PFPC may from time to time hold for the Fund;
(ii) all income in respect of any of such securities or other investment items;
(iii) all proceeds of the sale of any of such securities or investment items; and
(iv) all proceeds of the sale of securities issued by the Fund, which are received by PFPC from time to time, from or on behalf of the Fund.
(1) "Written Instructions." The term "Written Instructions" shall mean written instructions signed by two Authorized Persons and received by PFPC. The instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device.
2. Appointment.
The Fund hereby appoints PFPC to provide administration and accountings services to its Government Securities Portfolio, in accordance with the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish such services.
3. Delivery of Documents. The Fund has provided or, where applicable, will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the Fund's Governing Board, approving the appointment of Provident or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or agreements;
(e) a copy of the Fund's administration agreement if Provident is not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect of the Fund; and
(g) certified or authenticated copies of any and all amendments or supplements to the foregoing.
4. Compliance with Government rules and Regulations.
PFPC undertakes to comply with all applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, and the CEA, and any laws, rules and regulations of governmental authorities having jurisdiction with respect to all duties to
be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes responsibility for such compliance by the Fund.
5. Instructions.
Unless otherwise provided in this Agreement, PFPC shall act only upon Oral and Written Instructions.
PFPC shall be entitled to rely upon any Oral and Written Instructions it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume that any Oral or Written Instructions received hereunder is not in any way inconsistent with the provision of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund's Governing Board or of the Fund' shareholders.
The Fund agrees to forward to PFPC Written Instructions confirming Oral Instructions so that PFPC receives the Written Instructions by the close of business on the same day that such Ora Instructions are received. The fact that such confirming Written Instructions are not received by PFPC shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions. The Fund further agrees that PFPC shall incur no liability to the Fund in acting upon Oral or Written Instructions; provided such instructions reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. -If PFPC is in doubt as to which action it should or should not take, PFPC may request directions or advice, including oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any questions of law pertaining to any action it should or should not take, PFPC may request advice at its own cost form such counsel of its own choosing (who may be counsel for the Fund, the Fund's advisor PFPC, at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between directions, advice or oral or Written Instructions PFPC receives from the Fund, and the advice it receives from counsel, PFPC shall be entitled to rely upon and follow the advice of counsel.
(d) Protection of PFPC. PFPC shall be protected in any action it takes or does not take in reliance upon directions, advice or Oral or Written Instructions it receives from the Fund or from counsel and which PFPC believes, in good faith, to be consistent with those directions, advice and Oral or Written Instructions.
Nothing in this paragraph shall be construed so as to impose any obligation upon PFPC (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions unless, under the terms of other provisions of this Agreement, the same is a condition of PFPC's properly taking or not taking such action.
7. Records.
The books and records pertaining to the Fund, which are the possession of PFPC, 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, rules and regulations. The Fund, or the Fund's Authorized Persons, shall have access to such books and records at all times during PFPC's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC to the Fund or to an Authorized Person of the Fund, at the Fund's expense.
PFPC shall keep the following records:
(a) all books and records with respect to the Fund's books of account;
(b) records of the Fund's securities transaction;
(c) all other books and records as PFPC is required to maintain pursuant to Rule 31a-l of the 1940 Act and specifically set forth in Appendix A hereto.
8. Confidentiality.
PFPC agrees to keep confidential all records of the Fund a information relative to the Fund and its shareholders (past, present and potential), unless the release of such records or information other-wise consented to, in writing, by the Fund. The Fund agrees that such consent shall not be unreasonably withheld. The Fund further agrees that, should PFPC be required to provide such information or records to duly constituted authorities (who may institute civil or criminal contempt proceedings for failure to comply), PFPC shall not be required to seek the Fund's consent prior to disclosing such information.
9. Liaison with Accountants.
PFPC shall act as liaison with the Fund's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules. PFPC shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as such may be required by the Fund from time to time.
10. Disaster Recovery.
PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision of emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no liability with respect thereto.
11. Compensation.
As compensation for services rendered by PFPC during the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be agreed to in writing by the Fund and PFPC.
12. Indemnification.
The Fund agrees to indemnify and hold harmless PFPC and its nominees from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act, the CEA and any state and foreign securities and blue sky laws, and amendments thereto, and expenses, including (without limitation) attorneys' fees and disbursements, arising directly or indirectly from any action which PFPC takes or does not take (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon oral or Written Instructions. Neither PFPC, 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 PFPC's own willful misfeasance, gross negligence or reckless disregard of its duties and obligations under this Agreement.
13. Responsibility of PFPC.
PFPC 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 PFPC, in writing. PFPC shall be obligated to exercise care and diligence in the performance of its duties hereunder, to act in good faith and to use its best efforts, within reasonable limits, in performing services provided for under this Agreement. PFPC shall be responsible for failure to perform its duties under this Agreement arising out of PFPC's gross negligence. Notwithstanding the foregoing, PFPC shall not be responsible for losses beyond its control, provided that PFPC has acted in accordance with the standard of care set forth above; and provided further that PFPC shall only be responsible for that portion of losses or damages suffered by the fund are attributable to the gross negligence of PFPC.
Without limiting the generality of the foregoing or of any other provision of this Agreement, PFPC, in connection with its duties under this Agreement, shall not be liable for (a) the validity or invalidity or authority or lack thereof of any Oral or Written Instructions notice or other instrument which conforms to the applicable requirements of this Agreement, and which PFPC reasonably believes to be genuine; or (b) delays or errors or loss of data occurring by reason of circumstances beyond PFPC's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply. Notwithstanding anything in this Agreement to the contrary, PFPC shall have no liability to the Fund for any consequential, special or indirect losses or damages which the Fund may incur or suffer by or as a consequence of PFPC's performance of the services provided hereunder, whether or not the likelihood of such losses or damages was known by PFPC.
14. Description of Accounting Services.
(a) Services on a Continuing Basis. PFPC will perform the following accounting functions if required:
(i) Journalize the Fund's investment, capital share and income and expense activities;
(ii) Verify investment buy/sell trade tickets when received from the Fund's investment advisor and transmit trades to the Funds custodian. for proper settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund with the custodian, and provide the Fund's investment advisor with the beginning cash balance available for investment purposes;
(vi) Update the cash availability throughout the day as required by the Fund's advisor;
(vii) Post to and prepare the Fund's Statement of Assets and Liabilities and the Statement of Operations;
(viii) Calculate various contractual expenses (e.g., advisory and custody fees);
(ix) Monitor the expense accruals and notify Fund management of any proposed adjustments;
(x) Control all disbursements from the Fund and authorize such disbursements upon Written Instructions;
(xi) Calculate capital gains and losses;
(Xii) Determine the Fund's net income;
(xiii) Obtain security market quotes from independent pricing services approved by the Advisor, or if such quotes are unavailable, then obtain such prices from the Advisor, and in either case calculate the market value of the Fund's investments;
(xiv) Transmit or mail a copy of the daily portfolio valuation to the Advisor;
(xv) Compute the net asset value of the Fund;
(xvi) As appropriate, compute the Fund's yields, total return, expense ratios, portfolio turnover rate, and, if required, portfolio average dollar-weighted maturity; and
(xvii) Prepare a monthly financial statement, which will include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Cash Statement Schedule of Capital Gains and Losses.
15. Description of Administration Services.
(a) Services on a Continuing Basis.
(i) Prepare quarterly broker security transactions summaries;
(ii) Prepare monthly security transaction listings;
(iii) Assist in the preparation of support schedules necessary for completion of Federal and state tax returns; or
Prepare for execution and file the Fund's Federal and state tax returns;
(iv) Assist in the preparation of the Fund's Semi-Annual Reports with the SEC on Form N-SAR; or
Prepare and file the Fund's Semi-Annual Reports with the SEC an Form N-SAR.
(v) Assist in the preparation the Fund's annual, semi-annual, and quarterly Shareholder reports; or
Prepare and file with the SEC the Fund's annual, semi-annual, and quarterly shareholder reports;
(vi) Assist with the preparation of registration statements and other filings relating to the registration of Shares;
(vii) Monitor the Fund's status as a regulated investment company under Sub-Chapter M of the Internal Revenue Code of 1986, as amended; and
(viii) Coordinate contractual relationships and communications between the Fund and its service providers.
16. Duration and Termination.
This Agreement shall continue until terminated by the Fund or by PFPC on sixty
(60) days prior written notice to the other party.
17. Notices
All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered. Notices shall
be addressed (a) if to PFPC at PFPC's address, 103 Bellevue Parkway,
Wilmington, Delaware 19809; (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.
18. Amendments.
This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or waiver is sought.
19. Delegation.
PFPC may assign its rights and delegate its duties hereunder to any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC Financial Corp, provided that (i) PFPC gives the Fund thirty (30) days prior written notice; (ii) the delegate agrees with PFPC to comply with all relevant provisions of the 1940 Act; and (iii) PFPC and such delegate promptly provide such information as the Fund may request, and
respond to such questions as the Fund may ask, relative to the delegation, including (without limitation) the capabilities of the delegate.
20. 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.
21. Further Actions.
Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
22. Miscellaneous.
This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated and/or Oral Instructions.
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 Delaware and governed by Delaware 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
bindinq and shall inure to benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and first above written.
PROVIDENT FINANCIAL PROCESSING
CORPORATION
By: /s/ Stephen M.W. Young THE RBB FUND, INC. By: /s/ Edward J. Roach |
APPENDIX A
[List Books and Records to be
Maintained by PFPC]
Exhibit 9(k)
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
TERMS AND CONDITIONS
This Agreement is made as of November 5, 1991 by and between THE RBB FUND, INC., (the "Fund"), a Maryland corporation, and PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC"), a Delaware corporation which is an indirect wholly-owned subsidiary of PNC Financial Corp.
The Fund is registered as an open-end investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund wishes to retain PFPC to provide administration and accounting services to its New York Municipal Money Market Portfolio ("Portfolio"), and PFPC wishes to furnish such services.
In consideration of the promises and mutual covenants herein contained, the parties agree as follows:
1. Definitions.
(a) "Authorized Person." The term "Authorized Person" shall mean any officer of the Fund and any other person, who is duly authorized by the Fund's Governing Board, to give Oral and Written Instructions on behalf of the Fund. Such persons are listed in the Certificate attached hereto as the Authorized Persons Appendix or such appendix as may be amended in writing by the Fund's Governing Board from time to time. If Provident provides more than one service hereunder, the Fund's designation of Authorized Persons may vary by service.
(b) "Book-Entry System." The term "Book-Entry System" means Federal Reserve Treasury book-entry system for United States and federal agency securities, its successor or successors, and its nominee or nominees and any book-entry system maintained by an exchange registered with the SEC under the 1934 Act.
(c) "CFTC." The term "CFTC" shall mean the Commodities Futures Trading Commission.
(d) "Governing Board." The term "Governing Board" shall mean the Fund's Board of Directors if the Fund is a corporation or the Fund's Board of Trustees if the Fund is a trust, or, where duly authorized, a competent committee thereof.
(e) "Oral Instructions." The term "Oral Instructions" shall mean oral instructions received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized Person.
(f) "Provident". The term "Provident" shall mean Provident National Bank or a subsidiary or affiliate of Provident National Bank.
(g) "SEC". The term "SEC" shall mean the Securities and Exchange Commission.
(h) "Securities and Commodities Laws. The terms the "1933 Act" shall mean the Securities Act of 1933, as amended, the "1934 Act" shall mean the Securities Exchange Act of 1934, as amended, and the "CEA" shall mean the Commodities Exchange Act, as amended.
(i) "Services." The term "Services" shall mean the services required to be and provided to the Fund by PFPC.
(j) "Shares." The term "Shares" shall mean the shares of stock of any series or class of the Fund, or, where appropriate, units of beneficial interest in a trust where the Fund is organized as a trust.
(k) "Written Instructions." The term "Written Instructions" shall mean written instructions signed by two Authorized Persons and received by PFPC. The instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device.
2. Appointment.
The Fund hereby appoints PFPC to provide administration and accounting services to the New York Municipal Money Market Portfolio, in accordance with the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish such services.
3. Delivery of Documents.
The Fund has provided or, where applicable, will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the Fund's Governing Board, approving the appointment of PFPC or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration statement;
(c) a copy of the Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement or agreements relating to any class of Portfolio;
(e) a copy of the Fund's administration agreement if PFPC is not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect of the Fund; and
(g) certified or authenticated copies of any and all amendments or supplements to the foregoing.
4. Compliance with Government Rules and Regulations.
PFPC undertakes to comply with all applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, and the CEA, and any laws, rules and regulations of governmental authorities having jurisdiction with respect to all duties to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no responsibility for such compliance by the Fund.
5. Instructions.
Unless otherwise provided in this Agreement, PFPC shall act only upon Oral and Written Instructions.
PFPC shall be entitled to rely upon any Oral and Written Instructions it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume that any Oral or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund's Governing Board or of the Fund's shareholders.
The Fund agrees to forward to PFPC Written Instructions confirming oral Instructions except where such Oral Instructions are given by PFPC or its affiliates so that PFPC receives the Written Instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming Written Instructions are not received by PFPC shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions. The Fund further agrees that PFPC shall incur no liability to the Fund in acting upon oral or Written Instructions provided such instructions reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action it should or should not take, PFPC may request directions or advice, including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any questions of law pertaining to any action it should or should not take, PFPC may request advice at its own cost from such counsel of its own choosing (who may be counsel for the Fund, the Fund's advisor or PFPC, at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between directions, advice or oral or Written Instructions Provident receives from the Fund, and the advice it receives from counsel, PFPC shall be entitled to rely upon and follow the advice of counsel.
(d) Protection of PFPC. PFPC shall be protected in any action it takes or does not take in reliance upon directions, advice or Oral or Written Instructions it receives from the Fund or from counsel and which PFPC believes, in good faith, to be consistent with those directions, advice and Oral or Written Instructions. Nothing in this paragraph shall excuse PFPC when an action or inaction on its part constitutes willful misfeasance, bad faith, gross negligence or reckless disregard of its duties and obligations under this Agreement.
Nothing in this paragraph shall be construed so as to impose an obligation upon PFPC (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions unless, under the terms of other provisions of this Agreement, the same is a condition of PFPC's properly taking or not taking such action.
7. Records.
The books and records pertaining to the Fund, which are in the possession of PFPC 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, rules and regulations. The Fund, or the Fund's Authorized Persons, shall have access to such books and records at all times during PFPC's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC to the Fund or to an Authorized Person of the Fund, at the Fund's expense.
PFPC shall keep the following records:
(a) all books and records with respect to the Fund's books of account;
(b) records of the Fund's securities transactions;
(c) all other books and records required to be maintained pursuant to Rule 31a-1 of the 1940 Act in connection with the Services and as specifically set forth in Appendix A hereto.
8. Confidentiality.
PFPC agrees to keep confidential all records of the Fund and information relative to the Fund and its shareholders (past, present and potential), unless the release of such records or information is otherwise consented to, in writing, by the Fund. The Fund agrees that such consent shall not be unreasonably withheld. The Fund further agrees that, should PFPC be required to provide such information or records to duly constituted authorities (who may institute civil or criminal contempt proceedings for failure to comply), PFPC shall not be required to seek the Fund's consent prior to disclosing such information.
9. Liaison with Accountants.
PFPC shall act as liaison with the Fund's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules. PFPC shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as such may be required by the Fund from time to time.
10. Disaster Recovery.
PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision of emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no liability with respect thereto unless such failures result from PFPC's own willful misfeasance, bad faith, gross negligence or reckless disregard of its duties and obligations under this Agreement.
11. Compensation.
As compensation for services rendered by PFPC during the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be agreed to in writing by the Fund and PFPC.
12. Indemnification.
The Fund, on behalf of Portfolio agrees to indemnify and hold harmless PFPC and its nominees from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, and any state and foreign securities and blue sky laws, and amendments thereto), and expenses, including (without limitation) attorneys' fees and disbursements, arising directly or indirectly from any action which PFPC takes or does not take (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon Oral or Written Instructions. Neither PFPC, nor any of its nominees, shall be indemnified against any liability (or any expenses incident to such liability) arising out of PFPC's own willful misfeasance, bad faith, gross negligence or reckless disregard of its duties and obligations under this Agreement. Any amounts payable by the Fund hereunder shall be satisfied only against the Portfolio's assets and not against the assets of any other investment portfolio of the Fund.
13. Responsibility of PFPC.
PFPC 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 PFPC, in writing. PFPC shall be obligated to exercise care and diligence in the performance of its duties hereunder, to act in good faith and to use its best efforts, within reasonable limits, in performing services provided for under this Agreement. PFPC shall be responsible for failure to perform its duties under this Agreement arising out of PFPC's willful misfeasance, bad faith, gross negligence or reckless disregard of its duties and obligations under this Agreement. Notwithstanding the foregoing, PFPC shall not be responsible for losses beyond its control, provided that PFPC has acted in accordance with the standard of care set forth above; and provided further that PFPC shall only be responsible for that portion of losses or damages suffered by the Fund that are attributable to PFPC's failure to act in accordance with the standard of care stated herein.
Without limiting the generality of the foregoing or of any other provision of this Agreement, PFPC, in connection with its duties under this Agreement, shall not be liable for (a) the validity or invalidity or authority or lack thereof of any Oral or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, and which PFPC reasonably believes to be genuine; or (b) delays or errors or loss of data occurring by reason of circumstances beyond PFPC`s control, including acts of civil or military authority, national emergencies, labor difficulties, fire, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply.
Notwithstanding anything in this Agreement to the contrary, PFPC shall have no liability to the Fund for any consequential, special or indirect losses or damages which the Fund may incur or suffer by or as a consequence of PFPC's performance of the services provided hereunder, whether or not the likelihood of such losses or damages was known by PFPC.
14. Description of Administration and Accounting Services.
(a) Services on a Continuing Basis. PFPC will perform the following accounting functions:
(i) Journalize the Portfolio's investment, capital share and income and expense activities;
(ii) Verify investment buy/sell trade tickets and transmit trades to the Fund's custodian for proper settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Portfolio with the custodian, and prepare the beginning cash balance available for investment purposes;
(vi) Update the cash availability throughout the day as required;
(vii) Post to and prepare the Portfolio's Statement of Assets and Liabilities and the Statement of operations;
(viii) Calculate various contractual expenses (e.g., advisory and custody fees);
(ix) Monitor the expense accruals and notify Fund management of any proposed adjustments;
(x) Control all disbursements from the Portfolio and authorize such disbursements upon Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine the Portfolio's net income;
(xiii) Obtain security market quotes from independent pricing services approved by the Fund, or if such quotes are unavailable, then obtain such prices from the management of the Fund, and in either case calculate the market value of the Fund's Investments;
(xiv) Transmit or mail a copy of the daily portfolio valuation to the Advisor;
(xv) Compute the net asset value of the Portfolio;
(xvi) As appropriate, compute the yields, total return, expense ratios, portfolio turnover rate, and, if required, portfolio average dollar-weighted maturity; and
(xvii) Prepare a monthly financial statement, which will include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets Cash Statement
Schedule of Capital Gains and Losses.
15. Description of Administration Services.
(a) Services on a Continuing Basis. PFPC will provide the following administration functions:
(i) Prepare quarterly broker security transactions summaries;
(ii) Supply various normal and customary Portfolio and Fund statistical data as requested on an ongoing basis;
(iii) Prepare monthly security transaction listings;
(iv) Prepare for execution and file the Fund's Federal and state tax returns;
(v) Prepare and file the Fund's Semi-Annual Reports with the SEC on Form N-SAR;
(vi) Prepare and file with the SEC the Fund's annual, semi-annual, and quarterly Shareholder reports; or
(vii) Assist with the preparation of registration statements and other filings relating to the registration of Shares;
(viii) Monitor the Fund's status as a regulated investment company under Sub-chapter M of the Internal Revenue Code of 1986, as amended;
(ix) Coordinate contractual relationships and communications between the Fund and its contractual service providers;
(x) Qualify the Class O Shares for sale in each state in which the Fund's Board of Directors determines to sell the Class O Shares and make all filings and take all appropriate actions necessary to maintain and renew the registration of the Class O Shares;
(xi) Monitor the Fund's compliance with the amounts and conditions of each such state qualification; and
(xii) Maintain the Fund's fidelity bond as required by the 1940 Act and obtain a director's and officer's liability policy.
16. Duration and Termination.
This Agreement shall continue until terminated by the Fund on sixty
(60) days' prior written notice to the other party or by PFPC on ninety (90)
days' prior written notice to the other party.
17. Notices.
All notices and other communications, including Written Instructions, shall be in writing or by confirming telegram, cable, telex or facsimile sending device. If notice is sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given three days after it has been mailed. If notice is sent by messenger, it shall be deemed to have been given on the day it is delivered. Notices shall be addressed (a) if to PFPC at PFPC's address, 103 Bellevue Parkway, Wilmington, Delaware 19809; (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.
18. Amendments.
This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or waiver is sought.
19. Delegation.
PFPC may assign its rights and delegate its duties hereunder to any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC Financial Corp, provided that (i) PFPC gives the Fund thirty (30) days prior written notice; (ii) the delegate agrees with PFPC and the Fund to comply with all relevant provisions of the 1940 Act; and (iii) PFPC and such delegate promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation, including (without limitation) the capabilities of the delegate.
20. 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.
21. Further Actions.
Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
22. Miscellaneous.
This Agreement embodies the entire agreement and under standing between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated and/or oral Instructions.
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 Delaware and governed by Delaware 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written.
PROVIDENT FINANCIAL PROCESSING
CORPORATION
(SEAL) By: /s/ STEPHEN M. WYNNE
--------------------
Title: Senior VP
(SEAL)
|
THE RBB FUND, INC.
By: /s/ Edward J. Roach
-------------------
Title: President and Treasurer
|
APPENDIX A
[List Books and Records to be
Maintained by PFPC]
Exhibit 9(l)
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of November 5, 1991 between THE RBB FUND, INC., a Maryland corporation (the "Fund"), and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent") which is an indirect, wholly owned subsidiary of PNC Financial Corp.
R E C I T A L
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 desires to retain the Transfer Agent to serve as the Fund's transfer agent, registrar, and dividend disbursing agent with respect to Shares (as defined below) of its Common Stock, par value $.001 per share, and the Transfer Agent 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 the Transfer Agent to serve as transfer agent, registrar and dividend disbursing agent for the Fund for the period and on the terms set forth in this Agreement with respect to shares (the "Shares") of each class of Common Stock as to which the Fund and the Transfer Agent have entered into a Transfer Agency Agreement Supplement (individually, a "Class," and collectively, the "Classes"). The Transfer Agent shall identify to each Class, or any additional class hereafter created that is designated by the Fund as a Class, property belonging to such Class and in such reports, confirmations and notices to the Fund called for under this Agreement shall identify the Class to which such report, confirmation or notice pertains. The Transfer Agent accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Paragraph 16 of this Agreement.
2. Delivery of Documents. The Fund has furnished the Transfer Agent with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the appointment of the Transfer Agent as transfer agent and registrar and dividend disbursing agent for the Bradford Classes and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Fund's officers and other persons authorized to issue Oral Instructions and to sign Written Instructions, as hereinafter defined, on behalf of the Fund and to execute stock certificates representing Shares;
(c) The Fund's Articles of Incorporation filed with the Department of Assessments and Taxation of the State of Maryland on February 29, 1988 and all amendments thereto (such Articles of Incorporation, as presently in effect and as they shall from time to time be amended, are herein called the "Charter");
(d) The Fund's Articles Supplementary filed with the Department of Assessments and Taxation of the State of Maryland on March 24, 1988, and all further Articles Supplementary filed with the State of Maryland (the "Articles Supplementary");
(e) The Fund's By-Laws and all amendments thereto (such By-Laws, as presently in effect and as they shall from time to time be amended, are herein called the "By-Laws");
(f) Copies of all documents relating to any voluntary investor service plans sponsored by the Fund;
(g) Each Investment Advisory and Administration Agreement between Provident Institutional Management Corporation (the "Advisor") and the Fund relating to a Class (collectively, the "Advisory Agreements") and each Sub-Advisory Agreement between Provident National Bank (which in its capacity as Sub-Advisor is hereinafter referred to as the "Sub-Advisor") and the Advisor relating to a Class (collectively with the Advisory Agreements, the "Advisory Contracts");
(h) The Custodian Agreement between Provident National Bank (which in its capacity as custodian is hereinafter referred to as the "Custodian") and the Fund dated as of August 16, 1988 (the "Custodian Agreement");
(i) Each Distribution Agreement between Counsellors Securities Inc. (the "Distributor") and the Fund with respect to any Class (collectively, the "Distribution Agreements") and the form of each related Dealer Agreement for broker-dealers participating in the distribution of any Bradford Class ("Participating Dealers")
(j) Each Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act with respect to a Class (collectively, the "Distribution Plans");
(k) The Fund's Notification of Registration filed pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the Securities and Exchange Commission ("SEC") on March 24, 1988;
(1) The Fund's most recent Post-Effective Amendment to Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-20827) and under the 1940 Act as filed with the SEC on March 24, 1988 relating to the Shares, and all amendments thereto;
(m) The Fund's most recent prospectuses relating to any of the Shares (each such prospectus, and all amendments and supplements thereto herein called a "Prospectus"); and
(n) Before the Fund engages in any transactions
regulated by the Commodity Futures Trading Commission ("CFTC"), copy of either
(i) a filed notice of eligibility to claim the exclusion from the definition of
"commodity pool operator" contained in Section 2(a)(1)(A) of the ("CEA") that is
provided in Rule 4.5 under the CEA, together with all supplements as are
required by the CFTC, or (ii) a letter which has been granted the Fund by the
CFTC which states that the Fund will not be treated as a "pool" as defined in
Section 4.10(d) of the CFTC's General Regulations, or (iii) a letter which has
been granted the Fund by the CFTC which states that the CFTC will not take any
enforcement action if the Fund does not register as a "commodity pool operator."
The Fund will furnish the Transfer Agent from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term "Authorized Person" means any officer of the Fund and any other person, whether or not any such person is an officer or employee of the Fund, duly authorized by the Board of Directors of the Fund to give Oral and Written Instructions on behalf of the Fund and listed on the Certificate annexed hereto as Appendix A or any amendment thereto as may be received by the Transfer Agent from time to time.
(b) "Oral Instructions" As used in this Agreement, the term "Oral Instructions" means oral instructions actually received by the Transfer Agent from an Authorized Person or from a person reasonably believed by the Transfer Agent to be an Authorized Person. The Fund agrees to deliver to the Transfer Agent, at the time and in the manner specified in Paragraph 4(b) of this Agreement, Written Instructions confirming oral Instructions.
(c) "Written Instructions". As used in this Agreement, the term "Written Instructions" means written instructions delivered by hand, mail, tested telegram, cable, telex or facsimile sending device, and received by the Transfer Agent and signed by an Authorized Person.
4. Instructions Consistent with Charter and By-Laws.
(a) Unless otherwise provided in this Agreement, the Transfer Agent shall act only upon Oral or Written Instructions. Although the Transfer Agent may know of the provisions of the Charter and By-Laws of the Fund, the Transfer Agent may assume that any oral or Written Instructions received hereunder are not in any way inconsistent with any provisions of such Charter or By-Laws or any vote, resolution or proceeding of the Shareholders, or of the Board of Directors, or of any committee thereof.
(b) The Transfer Agent shall be entitled to rely upon any oral Instructions and any Written Instructions actually received by the Transfer Agent pursuant to this Agreement. The Fund agrees to forward to the Transfer Agent Written Instructions confirming Oral Instructions in such manner that the Written Instructions are received by the Transfer Agent by the close of business of the same day that such Oral Instructions are given to the Transfer Agent. The Fund agrees that the fact that such confirming Written Instructions are not received by the Transfer Agent shall in no way affect the validity of the transactions or enforceability of the transactions authorized by the Fund by giving oral Instructions. The Fund agrees that the Transfer Agent shall incur no liability to the Fund in acting upon oral Instructions given to the Transfer Agent hereunder concerning such transactions, provided such instructions reasonably appear to have been received from an Authorized Person.
5. Transactions Not Requiring Instructions. In the absence of contrary Written Instructions, the Transfer Agent is authorized to take the following actions:
(a) Issuance of Shares. Upon receipt of a purchase order from or on behalf of an investor for the purchase of Shares and sufficient information, including a completed application to purchase ("Application"), to enable the Transfer Agent to establish a Shareholder account and to determine which Class of Shares the investor wishes to purchase, and after confirmation of receipt of or crediting of Federal funds for such order from the Fund's Custodian, receipt by the Transfer Agent of a check payable to the Transfer Agent for such order, the Transfer Agent shall issue and credit the account of the investor or other record holder with Shares in the manner described in the Prospectus relating to such Shares.
(b) Transfer of Shares. Uncertificated Securities. Where a Shareholder does not hold a certificate representing the number of Shares in his account and does provide the Transfer Agent with instructions for the transfer of such Shares and such other appropriate documentation to permit a transfer as specified in the Prospectus relating to such Shares, then the Transfer Agent shall register such Shares and shall deliver them pursuant to instructions received from the transferor, pursuant to the rules of the exchange upon which Shares are listed (if any), the rules and regulations of the SEC, and the law of the State of Maryland relating to the transfer of shares of common stock.
(c) Stock Certificates. If at any time the Fund issues stock certificates with respect to any Class of Shares, the following provisions will apply with respect to such Class of Shares:
(i) The Fund will supply the Transfer Agent with a sufficient supply of stock certificates representing such Class of Shares, in the form approved from time to time by the Board of Directors of the Fund, and, from time to time, shall replenish such supply upon request of the Transfer Agent. Such stock certificates shall be properly signed, manually or by facsimile signature, by the duly authorized officers of the Fund, whose names and positions shall be set forth on Appendix B, and shall bear the corporate seal or facsimile thereof of the Fund, and notwithstanding the death, resignation or removal of any officer of the Fund, such executed certificates bearing the manual or facsimile signature of such officer shall remain valid and may be issued to Shareholders until the Transfer Agent is otherwise directed by Written Instructions.
(ii) In the case of the loss or destruction of any certificate representing any class of Shares, no new certificate shall be issued in lieu thereof, unless there shall first have been furnished an appropriate bond of indemnity issued by the surety company approved by the Transfer Agent.
(iii) Upon receipt of signed stock certificates, which shall be in proper form for transfer, and upon cancellation or destruction thereof, the Transfer Agent shall countersign, register and issue new certificates for the same number of such class of Shares and shall deliver them pursuant to instructions received from the transferor, the rules and regulations of the SEC, and the law of the State of Maryland relating to the transfer of shares of common stock.
(iv) Upon receipt of the stock certificates, which shall be in proper form for transfer, together with the Shareholder's instructions to hold such stock certificates for safekeeping, the Transfer Agent shall reduce such Shares to uncertificated status, while retaining the appropriate registration in the name of the Shareholder upon the transfer books.
(v) Upon receipt of written instructions from a Shareholder of uncertificated securities for a certificate in the number of Shares in his account, the Transfer Agent will issue such stock certificates and deliver them to the Shareholder.
(d) Redemption of Shares. Upon receipt of a redemption order from a Shareholder in the manner and form specified in the Prospectus relating to such Shares, the Transfer Agent shall redeem the number of Shares so indicated from the redeeming Shareholder's account and receive from the Fund's Custodian and disburse to the redeeming Shareholder or Shareholder account as designated in the Application the redemption proceeds therefor or, in the case of a redemption check, to the party presenting such check for payment in accordance with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian.
6. Authorized Shares. The Fund's authorized capital stock
consists of thirty billion (30,000,000,000) shares of Common Stock, par value
$.001 per share, of which: 100 million (100,000,000) Shares constitute the
Class A Shares, 100 million (100,000,000) Shares constitute the Class B Shares,
100 million (100,000,000) Shares constitute the Class C Shares, 100 million
(100,000,000) Shares constitute the Class D Shares, 500 million (500,000,000)
Shares constitute the Class E Shares, 500 million (500,000,000) Shares
constitute the Class F Shares, 500 million (500,000,000) Shares constitute the
Class G Shares, 500 million (500,000,000) Shares constitute the Class H Shares,
500 million (500,000,000) Shares constitute the Class I Shares, 500 million
(500,000,000) Shares constitute the Class J Shares, 500 million (500,000,000)
Shares constitute the Class K Shares, 500 million (500,000,000) Shares
constitute the Class L Shares, 500 million (500,000,000) Shares constitute the
Class M Shares, 500 million (500,000,000) Shares constitute the Class N Shares,
500 million (500,000,000) Shares constitute the Class 0 Shares, 100 million
(100,000,000) Shares constitute the Class P Shares, 100 million (100,000,000)
Shares constitute the Class Q Shares, 500 million (500,000,000) Shares
constitute the Class R Shares, 500 million (500,000,000) Shares constitute the
Class S Shares, 500 million (500,000,000) Shares constitute the Class Alpha 1
Shares, 500 million (500,000,000) Shares constitute the Class Alpha 2 Shares,
500 million (500,000,000) Shares constitute the Class Alpha 3 Shares, 500
million (500,000,000) Shares constitute the Class Alpha 4 Shares, 500 million
(500,000,000) Shares constitute the Class Beta 1 Shares, 500 million
(500,000,000) Shares constitute the Class Beta 2 Shares, 500 million
(500,000,000) Shares constitute the Class Beta 3 Shares, 500 million
(500,000,000) Shares constitute the Class Beta 4 Shares, 500 million
(500,000,000) Shares constitute the Class Gamma 1 Shares, 500 million
(500,000,000) Shares constitute the Class Gamma 2 Shares, 500 million
(500,000,000) Shares constitute the Class Gamma 3 Shares, 500 million
(500,000,000) Shares constitute the Class Gamma 4 Shares, 500 million
(500,000,000) Shares constitute the Class Delta 1 Shares, 500 million
(500,000,000) Shares constitute the Class Delta 2 Shares, 500 million
(500,000,000) Shares constitute the Class Delta 3 Shares, 500 million
(500,000,000) Shares constitute the Class Delta 4 Shares, 500 million
(500,000,000) Shares constitute the Class Epsilon 1 Shares, 500 million
(500,000,000) Shares constitute the Class Epsilon 2 Shares, 500 million
(500,000,000) Shares constitute the Class Epsilon 3 Shares, 500 million
(500,000,000) Shares constitute the Class Epsilon 4 Shares, 500 million
(500,000,000) Shares constitute the Class Zeta 1 Shares, 500 million
(500,000,000) Shares constitute the Class Zeta 2 Shares, 500 million
(500,000,000) Shares constitute the Class Zeta 3 Shares, 500 million
(500,000,000) Shares constitute the Class Zeta 4 Shares, 500 million
(500,000,000) Shares constitute the Class Eta 1 Shares, 500 million
(500,000,000) Shares constitute the Class Eta 2 Shares, 500 million
(500,000,000) Shares constitute the Class Eta 3 Shares, 500 million
(500,000,000) Shares constitute the Class Eta 4 Shares, 500 million
(500,000,000) Shares constitute the Class Theta 1 Shares, 500 million
(500,000,000) Shares constitute the Class Theta 2 Shares, 500 million
(500,000,000) Shares constitute the Class Theta 3 Shares and 500 million
(500,000,000) Shares constitute the Class Theta 4 Shares. The Fund may from
time to time authorize the issuance of additional shares of its Common Stock,
issue additional series or classes of shares of its Common Stock or classify
and reclassify shares of such series or class and shall notify the Transfer
Agent of any such authorization, issuance, classification or reclassification.
The Fund agrees to notify the Transfer Agent promptly of any change in the
number of authorized Shares of any class and of any change in the number of
Shares registered under the 1933 Act. The Transfer Agent shall record issues of
all Shares and shall notify the Fund in case any proposed issue of Shares by
the Fund shall result in an over-issue, in which case the Transfer Agent shall
refuse to issue said Shares and shall not countersign and issue certificates
for such Shares.
7. Dividends and Distributions. The Fund shall furnish the Transfer Agent with appropriate evidence of action by the Fund's Board of Directors authorizing the declaration and payment of dividends and distributions as described in the Prospectuses. After deducting any amount required to be withheld by any applicable tax laws, rules and regulations or other applicable laws, the Transfer Agent shall in accordance with the instructions in proper form from a Shareholder and the provisions of the Fund's Charter and applicable Prospectus, pay such dividends to the Shareholders in the manner described in the applicable Prospectus. In lieu of receiving from the Fund's Custodian and paying to Shareholders cash dividends or distributions, the Transfer Agent may arrange for the direct payment of cash dividends and distributions to Shareholders by the Fund's Custodian, in accordance with such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian.
The Transfer Agent shall prepare, file with the Internal Revenue Service and other appropriate taxing authorities, and address and mail to Shareholders such returns and information relating to dividends and distributions paid by the Fund as are required to be so prepared, filed and mailed by applicable laws, rules and regulations, or such substitute form of notice as may from time to time be permitted or required by the Internal Revenue Service. On behalf of the Fund, the Transfer Agent shall mail certain requests for Shareholders' certifications under penalties of perjury and pay on a timely basis to the appropriate Federal authorities any taxes to be withheld on dividends and distributions paid by the Fund, all as required by applicable Federal tax laws and regulations.
In accordance with the applicable Prospectus and such procedures and controls as are mutually agreed upon from time to time by and among the Fund, the Transfer Agent and the Fund's Custodian, the Transfer Agent shall (a) arrange for issuance of Shares obtained through (1) transfers of funds from Shareholders' accounts at financial institutions, (2) the Fund's pre-authorized check plan, and (3) the Fund's right of accumulation plan; (4) the Fund's automatic investing program; (b) arrange for the exchange of Shares of a class or series of the Fund having an exchange privilege for Shares of other classes or series of the Fund to which such exchange privilege extends; and (c) arrange for systematic withdrawals from the account of a Shareholder participating in the Fund's systematic withdrawal program.
8. Communications with Shareholders.
(a) Communications to Shareholders. The Transfer Agent will address and mail all communications by the Fund to its Shareholders, including reports to Shareholders, confirmations of purchases and sales of Shares, monthly statements, year-end federal tax information, dividend and distribution notices and proxy material for its meetings of Shareholders. The Transfer Agent will receive and tabulate the proxy cards for the meetings of the Fund's Shareholders.
(b) Correspondence. The Transfer Agent will answer such correspondence from Shareholders, securities brokers and others relating to its duties hereunder and such other correspondence as may from time to time be mutually agreed upon between the Transfer Agent and the Fund.
9. Records. The Transfer Agent shall maintain records of the accounts for each Shareholder showing the following information:
(a) name, address and United States Tax Identification or Social Security number;
(b) number and Class of Shares held and number and Class of Shares for which certificates, if any, have been issued, including certificate numbers and denominations;
(c) historical information regarding the account of each Shareholder including dividends and distributions paid and the date and price for all transactions on a Shareholder's account;
(d) any stop or restraining order placed against a Shareholders account;
(e) any correspondence relating to the current maintenance of a Shareholder's account;
(f) information with respect to withholdings; and,
(g) any information required in order for the Transfer Agent to perform any calculations contemplated or required by this Agreement.
The Transfer Agent shall keep a record of all redemption checks and dividend checks returned by postal authorities, and shall maintain such records as are required for the Fund to comply with the escheat laws of any State or other authority.
The books and records pertaining to the Fund which are in the possession of the Transfer Agent 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 and shall, to the extent practicable, be maintained separately for each portfolio of the Fund. The Fund, or the Fund's authorized representatives, shall have access to such books and records at all times during the Transfer Agent's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Transfer Agent to the Fund or the Fund's authorized representative at the Fund's expense.
10. Ongoing Functions. The Transfer Agent will perform the following functions on an ongoing basis:
(a) furnish daily reports of transactions in Shares;
(b) furnish monthly reports of transactions in Fund Shares by type (Keogh, IRA, other) including numbers of accounts;
(c) furnish state-by-state blue sky registration reports to the Fund;
(d) calculate sales load or compensation payment, if applicable, and provide such information to the Fund;
(e) calculate dealer commissions for the Fund, as applicable;
(f) provide toll-free lines for direct Shareholder use, plus customer liaison staff with on-line inquiry capacity;
(g) mail duplicate confirmations to dealers of their clients' activity, whether executed through the dealer or directly with the Transfer Agent;
(h) provide detail for underwriter or broker confirmations and other participating dealer Shareholder accounting, in accordance with such procedures a way be agreed upon between the Fund and the Transfer Agent;
(i) provide Shareholder lists and statistical information concerning accounts to the Fund; and
(j) provide timely notification of Fund activity and such other information as may be agreed upon from time to time between the Transfer Agent and the Fund Custodian, to the Fund or the Custodian.
11. Cooperation with Accountants. The Transfer Agent shall cooperate with the Fund's independent public accountants and shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion as such may be required by the Fund from time to time.
12. Confidentiality. The Transfer Agent agrees on behalf of itself and its employees to treat confidentially all records and other information relative to the Fund and its prior, present or potential Shareholders, 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 Transfer Agent 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.
13. Equipment Failures. In the event of equipment failures beyond the Transfer Agent's control, the Transfer Agent shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no ability with respect thereto. The foregoing obligation shall not extend to computer terminals located outside of premises maintained by the Transfer Agent. The Transfer Agent shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available.
14. Right-to Receive Advice.
(a) Advice of Fund. If the Transfer Agent shall be in doubt as to any action to be taken or omitted by it, it may request, and shall receive, from the Fund directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If the Transfer Agent shall be in doubt as to any question of law involved in any action to be taken or omitted by the Transfer Agent, it may request advice at its own cost from counsel of its own choosing (who may be counsel for the Advisor, the Fund or the Transfer Agent at the option of the Transfer Agent).
(c) Conflicting Advice. In case of conflict between directions, advice or Oral or Written Instructions received by the Transfer Agent pursuant to subparagraph (a) of this Paragraph and advice received by the Transfer Agent pursuant to subparagraph (b) of this Paragraph, the Transfer Agent shall be entitled to rely on and follow the advice received pursuant to the latter provision alone.
(d) Protection of the Transfer Agent. The Transfer Agent shall be protected in any action or inaction which it takes in reliance on any directions, advice or oral or Written Instructions received pursuant to subparagraphs (a) or (b) of this Paragraph which the Transfer Agent, after receipt of any such directions, advice or oral or Written Instructions, in good faith believes to be consistent with such directions, advice or oral or Written Instructions as the case may be. However, nothing in this Paragraph shall be construed as imposing upon the Transfer Agent any obligation (i) to seek such directions, advice or oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions when received, unless, under the terms of another provision of this Agreement, the same is a condition to the Transfer Agent's properly taking or omitting to take such action. Nothing in this subparagraph shall excuse the Transfer Agent when an action or omission on the part of the Transfer Agent constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by the Transfer Agent of its duties and obligations under this Agreement.
15. Compliance with Governmental Rules and Regulations. The Transfer Agent assumes no responsibility for insuring that the Fund complies with all applicable requirements of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act, the CEA, and any laws, rules and regulations of governmental authorities having jurisdiction.
16. Compensation. As compensation for its services, the Transfer Agent will be paid fees with respect to a Class as set forth in the applicable Transfer Agency Agreement Supplement.
17. Indemnification. The Fund agrees to indemnify and hold
harmless the Transfer Agent and its nominees and sub-contractors from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act,
the CEA, 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 the Transfer Agent takes or does or omits to take or do
(i) at the request or on the direction of or in reliance on the advice of the
Fund or (ii) upon Oral or Written Instructions, provided, that neither the
Transfer Agent nor any of its nominees or sub-contractors shall be indemnified
against any liability to the Fund or to its Shareholders (or any expenses
incident to such liability) arising out of the Transfer Agent's or such
nominee's or such sub-contractor's own willful misfeasance, bad faith or
negligence or reckless disregard of its duties in connection with the
performance of its duties and obligations specifically described in this
Agreement.
18. Responsibility of the Transfer Agent. The Transfer Agent 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 the Transfer Agent in writing. In the performance of its duties hereunder, the Transfer Agent shall be obligated to exercise care and diligence and to act in good faith and to use its best efforts within reasonable limits to insure the accuracy and completeness of all services performed under this Agreement. The Transfer Agent shall be responsible for its own negligent failure to perform its duties under this Agreement, but to the extent that duties, obligations and responsibilities are not expressly set forth in this Agreement, the Transfer Agent shall not be liable for any act or omission which does not constitute willful misfeasance, bad faith or gross negligence on the part of the Transfer Agent or reckless disregard of such duties, obligations and responsibilities. Without limiting the generality of the foregoing or of any other provision of this Agreement, the Transfer Agent 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 Oral or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, if any, and which the Transfer Agent reasonably believes to be genuine, or (b) delays or errors or loss of data occurring by reason of circumstances beyond the Transfer Agent's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown (except as provided in Paragraph 13), flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply.
19. Duration and Termination. This Agreement shall continue until termination by the Fund or by the Transfer Agent on sixty (60) days written notice.
20. Registration as a Transfer Agent. The Transfer Agent represents that it is currently registered with the appropriate Federal agency for the registration of transfer agents, and that it will remain so registered for the duration this Agreement. The Transfer Agent agrees that it will promptly notify the Fund in the event of any material change in its status as a registered transfer agent. Should the Transfer Agent fail to be registered with the SEC as a transfer agent at any time during this Agreement, the Fund may, on written notice to the Transfer Agent, immediately terminate this Agreement.
21. Notices. All notices and other communications, including Written Instructions (collectively referred to as "Notice" or "Notices" in this Paragraph), hereunder shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notices shall be addressed (a) if to the Transfer Agent at P. 0. Box 8950, Wilmington, Delaware 19899; (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 and the address of the addressee thereof are, at the time of sending, more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given five days after it is sent, or if sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately, and, if the location of the sender of a Notice and the address of the addressee thereof are, at the time of sending, not more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given three days after it is sent, or if 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. All postage, cable, telegram, telex and facsimile sending device charges arising from the sending of a Notice hereunder shall be paid by the sender.
22. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
23.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.
24. Delegation of Duties. On thirty (30) days prior written
notice to the Fund, the Transfer Agent may assign its rights and delegate its
duties hereunder to any wholly owned direct or indirect subsidiary of Provident
National bank or PNC Financial Corp, provided that (i) the delegate agrees with
the Transfer Agent to comply with all relevant provisions of the 1940 Act; and
(ii) the Transfer Agent and such delegate shall promptly provide such
information as the Fund may request, and respond to such question as the Fund
may ask, relative to the delegation, including (without limitation) the
capabilities of the delegate. Upon such assignment and delegation, the Transfer
Agent shall be relieved of any further duties or obligations hereunder and from
any liability for any acts or failures to act occurring thereafter.
25. 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.
26. Miscellaneous. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties hereto may embody in one or more separate documents their agreement, if any, with respect to Oral Instructions. 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 Delaware and governed by Delaware 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written.
[SEAL] THE RBB FUND, INC.
Attest: ____________________________ By: /s/Edward J. Roach
____________________
(SEAL] Edward J. Roach
PROVIDENT FINANCIAL
PROCESSING CORPORATION
Attest: ____________________________ By: illegible
____________
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APPENDIX A
Authorized Persons
----------------------- -------------------------
(name) (signature)
----------------------- -------------------------
(name) (signature)
----------------------- -------------------------
(name) (signature)
----------------------- -------------------------
(name) (signature)
----------------------- -------------------------
(name) (signature)
----------------------- -------------------------
(name) (signature)
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APPENDIX B
TRANSFER AGENCY AGREEMENT SUPPLEMENT
(Bradford Classes)
This supplemental agreement is entered into this 5th day of November, 1991 by and between THE RBB FUND, INC. (the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent"), which is an indirect, wholly owned subsidiary of PNC Financial Corp.
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 November 5, 1991 (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 for 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 Bradford Classes of Common Stock (Classes R and S) of the Fund. Each such Bradford Class 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, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
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. PROVIDENT FINANCIAL PROCESSING
CORPORATION
By /s/Edward J. Roach By illegible
___________________ ___________
Edward J. Roach
President
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TRANSFER AGENCY AGREEMENT SUPPLEMENT
(Alpha Classes)
This supplemental agreement is entered into this 5th day of November, 1991, by and between THE RBB FUND, INC. (the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent"), which is an indirect, wholly owned subsidiary of PNC Financial Corp.
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 November 5, 1991 (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 for 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 Alpha Classes of Common Stock (Class Alpha 1, Alpha 2, Alpha 3 and Alpha 4) of the Fund. Each such Alpha Class 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, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
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. PROVIDENT FINANCIAL PROCESSING
CORPORATION
By /s/Edward J. Roach By illegible
___________________ ___________
Edward J. Roach
President
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TRANSFER AGENCY AGREEMENT SUPPLEMENT
(Beta Classes)
This supplemental agreement is entered into this 5th day of November, 1991 by and between THE RBB FUND, INC. (the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent"), which is an indirect, wholly owned subsidiary of PNC Financial Corp.
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 November 5, 1991 (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 for 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 Beta Classes of Common Stock (Class Beta 1, Beta 2, Beta 3 and Beta 4) of the Fund. Each such Beta Class 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, monthly fees that shall be agreed to from time no to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
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. PROVIDENT FINANCIAL PROCESSING
CORPORATION
By /s/Edward J. Roach By illegible
___________________ ___________
Edward J. Roach
President
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TRANSFER AGENCY AGREEMENT SUPPLEMENT
(Gamma Classes)
This supplemental agreement is entered into this 5th day of November, 1991 by and between THE RBB FUND, INC. (the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent"), which is an indirect, wholly owned subsidiary of PNC Financial Corp.
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 November 5, 1991 (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 for 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 Gamma Classes of Common Stock (Class Gamma 1, Gamma 2, Gamma 3 and Gamma 4) of the Fund. Each such Gamma Class 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, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
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. PROVIDENT FINANCIAL PROCESSING
CORPORATION
By /s/Edward J. Roach By illegible
___________________ ___________
Edward J. Roach
President
|
TRANSFER AGENCY AGREEMENT SUPPLEMENT
(Delta Classes)
This supplemental agreement is entered into this 5th day of November, 1991 by and between THE RBB FUND, INC. (the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent"), which is an indirect, wholly owned subsidiary of PNC Financial Corp.
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 November 5, 1991 (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 for 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 Delta Classes of Common Stock (Class Delta 1, Delta 2, Delta 3 and Delta 4) of the Fund. Each such Delta Class 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, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
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. PROVIDENT FINANCIAL PROCESSING
CORPORATION
By /s/Edward J. Roach By illegible
___________________ ___________
Edward J. Roach
President
|
TRANSFER AGENCY AGREEMENT SUPPLEMENT
(Epsilon Classes)
This supplemental agreement is entered into this 5th day of November, 1991, by and between THE RBB FUND, INC. (the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent"), which is an indirect, wholly owned subsidiary of PNC Financial Corp.
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 November 5, 1991 (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 for 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 Epsilon Classes of Common Stock (Class Epsilon 1, Epsilon 2, Epsilon 3 and Epsilon 4) of the Fund. Each such Epsilon Class 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, monthly fees that shall be to from tine to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
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. PROVIDENT FINANCIAL PROCESSING
CORPORATION
By /s/Edward J. Roach By illegible
___________________ ___________
Edward J. Roach
President
|
TRANSFER AGENCY AGREEMENT SUPPLEMENT
(Zeta Classes)
This supplemental agreement is entered into this 5th day of November, 1991, by and between THE RBB FUND, INC. (the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent"), which is an indirect, wholly owned subsidiary of PNC Financial Corp.
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 November 5, 1991 (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 for 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 Zeta Classes of Common Stock (Class Zeta 1, Zeta 2, Zeta 3 and Zeta 4) of the Fund. Each such Zeta Class 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, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
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. PROVIDENT FINANCIAL PROCESSING
CORPORATION
By /s/Edward J. Roach By illegible
___________________ ___________
Edward J. Roach
President
|
TRANSFER AGENCY AGREEMENT SUPPLEMENT
(Eta Classes)
This supplemental agreement is entered into this 5th day of November, 1991, by and between THE RBB FUND, INC. (the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent"), which is an indirect, wholly owned subsidiary of PNC Financial Corp.
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 November 5, 1991 (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 for 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 Eta Classes of Common Stock (Class Eta 1, Eta 2, Eta 3 and Eta 4) of the Fund. Each such Eta Class 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, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
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. PROVIDENT FINANCIAL PROCESSING
CORPORATION
By /s/Edward J. Roach By illegible
___________________ ___________
Edward J. Roach
President
|
TRANSFER AGENCY AGREEMENT SUPPLEMENT
(Theta Classes)
This supplemental agreement is entered into this 5th day of November, 1991, by and between THE RBB FUND, INC. (the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation (the "Transfer Agent"), which is an indirect, wholly owned subsidiary of PNC Financial Corp.
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 November 5, 1991 (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 for 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 Theta Classes of Common Stock (Class Theta 1, Theta 2, Theta 3 and Theta 4) of the Fund. Each such Theta Class 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, monthly fees that shall be agreed to from time to time by the Fund and the Transfer Agent, for each account open at any time during the month for which payment is being made, 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.
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. PROVIDENT FINANCIAL PROCESSING
CORPORATION
By /s/Edward J. Roach By illegible
___________________ ___________
Edward J. Roach
President
|
Exhibit 9(l)
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
TERMS AND CONDITIONS
This Agreement is made as of April 21, 1992 by and between THE RBB FUND, INC., (the "Fund"), a Maryland corporation, and PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC"), a Delaware corporation which is an indirect wholly owned subsidiary of PNC Financial Corp.
The Fund is registered as an open-end investment company under the Investment Company Act of 1940, as amended (the 1940 Act"). The Fund wishes to retain PFPC to provide administration and accounting services to its Tax-Free Money Market Portfolio ("Portfolio"), and PFPC wishes to furnish such services.
In consideration of the promises and mutual covenants herein contained, the parties agree as follows:
1. Definitions.
(a) "Authorized Person." The term "Authorized Person" shall mean any officer of the Fund and any other person, who is duly authorized by the Fund's Governing Board, to give Oral and Written Instructions on behalf of the Fund. Such persons are listed in the Certificate attached hereto as the Authorized Persons Appendix or such appendix as may be amended in writing by the Fund's Governing Board from time to time. If Provident provides more than one service hereunder, the Fund's designation of Authorized Persons may vary by service.
(b) "Book-Entry System." The term "Book-Entry System" means Federal Reserve Treasury book-entry system for United States and federal agency securities, its successor or successors, and its nominee or nominees and any book-entry system maintained by an exchange registered with the SEC under the 1934 Act.
(c) "CFTC". The term "CFTC" shall mean the Commodities Futures Trading Commission.
(d) "Governing Board." The term "Governing Board" shall mean the Fund's Board of Directors if the Fund is a corporation or the Fund's Board of Trustees if the Fund is a trust, or, where duly authorized, a competent committee thereof.
(e) "Oral Instructions". The term "Oral Instructions" shall mean oral instructions received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized Person.
(f) "Provident". The term "Provident" shall mean Provident National Bank or a subsidiary or affiliate of Provident National Bank.
(g) "SEC". The term "SEC" shall mean the Securities and Exchange Commission.
(h) "Securities and Commodities Laws. The terms the "1933 Act" shall mean the Securities Act of 1933, as amended, the "1934 Act" shall mean the Securities Exchange Act of 1934, as amended, and the "CEA" shall mean the Commodities Exchange Act, as amended.
(i) "Services". The term "Services" shall mean the services required to be and provided to the Fund by PFPC.
(j) "Shares." The terms "Shares" shall mean the shares of stock of any series or class of the Fund, or, where appropriate, units of beneficial interest in a trust where the Fund is organized as a trust.
(k) "Written Instructions." The term "Written Instructions" shall mean written instructions signed by two Authorized Persons and received by PFPC. The instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device.
2. Appointment.
The Fund hereby appoints PFPC to provide administration and accounting services to the Tax-Free Money Market Portfolio, in accordance with the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish such services.
3. Delivery of Documents.
The Fund has provided or, where applicable, will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the Fund's Governing Board, approving the appointment of PFPC or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration statement;
(c) a copy of the Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement or agreements relating to any class of the Portfolio;
(e) a copy of the Fund's administration agreement if PFPC is not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect of the Fund; and
(g) certified or authenticated copies of any and all amendments or supplements to the foregoing.
4. Compliance with Government Rules and Regulations.
PFPC undertakes to comply with all applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, and the CEA, and any laws, rules and regulations of governmental authorities having jurisdiction with respect to all duties to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no responsibility for such compliance by the Fund.
5. Instructions.
Unless otherwise provided in this Agreement, PFPC shall act only upon Oral and Written Instructions.
PFPC shall be entitled to rely upon any Oral and Written Instructions it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume that any Oral or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund's Governing Board or of the Fund's shareholders.
The Fund agrees to forward to PFPC Written Instructions confirming Oral Instructions (except where such Oral Instructions are given by PFPC or its affiliates so that PFPC receives the Written Instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming Written Instructions are not received by PFPC shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions. The Fund further agrees that PFPC shall incur no liability to the Fund in acting upon Oral or Written Instructions provided such instructions reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action it should or should not take, PFPC may request directions or advice, including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any questions of law pertaining to any action it should or should not take, PFPC may request advice at its own cost from such counsel of its own choosing (who may be counsel for the Fund, the Fund's advisor or PFPC, at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between directions, advice or Oral or Written Instructions Provident receives from the Fund, and the advice it receives from counsel, PFPC shall be entitled to rely upon and follow the advice of counsel.
(d) Protection of PFPC. PFPC shall be protected in any action it takes or does not take in reliance upon directions, advice or Oral or Written Instructions it receives from the Fund or from counsel and which PFPC believes, in good faith, to be consistent with those directions, advice and Oral or Written Instructions. Nothing in this paragraph shall excuse PFPC when an action or inaction on its part constitutes willful misfeasance, bad faith, gross negligence or reckless disregard of its duties and obligations under this Agreement.
Nothing in this paragraph shall be construed so as to impose an obligation upon PFPC (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral or Written Instructions unless, under the terms of other provisions of this Agreement, the same is a condition of PFPC's properly taking or not taking such action.
7. Records.
The books and records pertaining to the Fund, which are in the possession of PFPC 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, rules and regulations. The Fund, or the Fund's Authorized Persons, shall have access to such books and records at all times during PFPC's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC to the Fund or to an Authorized Person of the Fund, at the Fund's expense.
PFPC shall keep the following records:
(a) all books and records with respect to the Fund's books of account;
(b) records of the Fund's securities transactions;
(c) all other books and records required to be maintained pursuant to Rule 31a-1 of the 1940 Act in connection with the Services and as specifically set forth in Appendix A hereto.
8. Confidentiality.
PFPC agrees to keep confidential all records of the Fund and information relative to the Fund and its shareholders (past, present and potential), unless the release of such records or information is otherwise consented to, in writing by the Fund. The Fund agrees that such consent shall not be unreasonably withheld. The Fund further agrees that, should PFPC be required to provide such information or records to duly constituted authorities (who may institute civil or criminal contempt proceedings for failure to comply), PFPC shall not be required to seek the Fund's consent prior to disclosing such information.
9. Liaison with Accountants.
PFPC shall act as liaison with the Fund's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules. PFPC shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as such may be required by the Fund from time to time.
10. Disaster Recovery.
PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision of emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no liability with respect thereto unless such failures result from PFPC's own willful misfeasance, bad faith, gross negligence or reckless disregard of its duties and obligations under this Agreement.
11. Compensation.
As compensation for services rendered by PFPC during the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be agreed to in writing by the Fund and PFPC.
12. Indemnification.
The Fund, on behalf of Portfolio, agrees to indemnify and hold
harmless PFPC and its nominees from all taxes, charges, expenses, assessments,
claims and liabilities (including, without limitation, liabilities arising
under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, and any state and
foreign securities and blue sky laws, and amendments thereto), and expenses,
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly from any action which PFPC takes or does not take (i) at
the request or on the direction of or in reliance on the advice of the Fund or
(ii) upon Oral or Written Instructions. Neither PFPC, nor any of its nominees,
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under this
Agreement. Any amounts payable by the Fund hereunder shall be satisfied only
against the Portfolio's assets and not against the assets of any other
investment portfolio of the Fund.
13. Responsibility of PFPC.
PFPC 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 PFPC, in writing. PFPC shall be obligated to exercise care and diligence in the performance of its duties hereunder, to act in good faith and to use its best efforts, within reasonable limits, in performing services provided for under this Agreement. PFPC shall be responsible for failure to perform its duties under this Agreement arising out of PFPC's willful misfeasance, bad faith, gross negligence or reckless disregard of its duties and obligations under this Agreement. Notwithstanding the foregoing, PFPC shall not be responsible for losses beyond its control, provided that PFPC has acted in accordance with the standard of care set forth above; and provided further that PFPC shall only be responsible for that portion of losses or damages suffered by the Fund that are attributable to PFPC's 1 failure to act in accordance with the standard of care stated herein.
Without limiting the generality of the foregoing or of any other provision of this Agreement, PFPC, in connection with its duties under this Agreement, shall not be liable for (a) the validity or invalidity or authority or lack thereof of any Oral or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, and which PFPC reasonably believes to be genuine; or (b) delays or errors or loss of data occurring by reason of circumstances beyond PFPC's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply.
Notwithstanding anything in this Agreement to the contrary, PFPC shall have no liability to the Fund for any consequential special or indirect losses or damages which the Fund may incur or suffer by or as a consequence of PFPC's performance of the services provided hereunder, whether or not the likelihood of such losses or damages was known by PFPC.
14. Description of Administration and Accounting Services.
(a) Services on a Continuing Basis. PFPC will perform the following accounting functions:
(i) Journalize the Portfolio's investment, capital share and income and expense activities;
(ii) Verify investment buy/sell trade tickets and transmit trades to the Fund's custodian for proper settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Portfolio' with the custodian, and prepare the beginning cash balance available for investment purposes;
(vi) Update the cash availability throughout the day as required;
(vii) Post to and prepare the Portfolio's Statement of Assets and Liabilities and the Statement of Operations;
(viii) Calculate various contractual expenses (e.g., advisory and custody fees);
(ix) Monitor the expense accruals and notify Fund management of any proposed adjustments;
(x) Control all disbursements from the Portfolio and authorize such disbursements upon Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine the Portfolio's net income;
(xiii) Obtain security market quotes from independent pricing services approved by the Fund, or if such quotes are unavailable, then obtain such prices from the management of the Fund, and in either case calculate the market value of the Fund's Investments;
(xiv) Transmit or mail a copy of the daily portfolio valuation to the Advisor;
(xv) Compute the net asset value of the Portfolio;
(xvi) As appropriate, compute the yields, total return, expense ratios, portfolio turnover rate, and, if required, portfolio average dollar-weighted maturity; and
(xvii) Prepare a monthly financial statement, which will include the following items:
Schedule of Investments Statement of Assets and Liabilities Statement of Operations Statement of Changes in Net Assets Cash Statement Schedule of Capital Gains and Losses.
15. Description of Administration Services.
(a) Services on a continuing Basis. PFPC will provide the following administration functions:
(i) Prepare quarterly broker security transactions summaries;
(ii) supply various normal and customary Portfolio and Fund statistical data as requested on an ongoing basis;
(iii) Prepare monthly security transaction listings;
(iv) Prepare for execution and file the Fund's Federal and state tax returns;
(v) Prepare and file the Fund's Semi-Annual Reports with the SEC on Form N-SAR;
(vi) Prepare and file with the SEC the Fund's annual, semi-annual, and quarterly Shareholder reports; or
(vii) Assist with the preparation of registration statements and other filings relating to the registration of Shares;
(viii) Monitor the Fund's status as a regulated investment company under Sub-chapter M of the Internal Revenue Code of 1986, as amended;
(ix) Coordinate contractual relationships and communications between the Fund and its contractual service providers;
(x) Qualify the Class O Shares for sale in each state in which the Fund's Board of Directors determines to sell the Class O Shares and make all filings and take all appropriate actions necessary to maintain and renew the registration of the Class O Shares;
(xi) Monitor the Fund's compliance with the amounts and conditions of each such state qualification; and
(xii) Maintain the Fund's fidelity bond as required by the 1940 Act and obtain a directors and officers liability policy.
16. Duration and Termination.
This Agreement shall continue until terminated by the Fund on sixty (60) days' prior written notice to the other party or by PFPC on ninety (90) days' prior written notice to the other party.
17. Notices.
All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered. Notices shall
be addressed (a) if to PFPC at PFPC's address, 103 Bellevue Parkway,
Wilmington, Delaware 19809; (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.
18. Amendments.
This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or waiver is sought.
19. Delegation.
PFPC may assign its rights and delegate its duties hereunder to any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC Financial Corp, provided that (i) PFPC gives the Fund thirty (30) days prior written notice; (ii) the delegate agrees with PFPC and the Fund to comply with all relevant provisions of the 1940 Act; and (iii) PFPC and such delegate promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation, including (without limitation) the capabilities of the delegate.
20. 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.
21. Further Actions.
Each party aqrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
22. Miscellaneous.
This Agreement embodies the entire agreement and under standing between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated and/or Oral Instructions.
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 Delaware and governed by Delaware 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 it of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written.
PROVIDENT FINANCIAL PROCESSING
CORPORATION
(SEAL) By: /S/ CHARLES D. CURTIS, JR.
--------------------------
Title: Vice President
(SEAL)
|
THE RBB FUND, INC.
By: /s/ Edward R. Roach
-------------------
Title: President
|
APPENDIX A
[List Books and Records to be
Maintained by PFPC]
Exhibit 11(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our Firm under the caption "Counsel" in the Statement of Additional Information that is included in Post-Effective Amendment No. 61 to the Registration Statement (No. 33-20827; 811-5518) on Form N-1A of The RBB Fund, Inc., under the Securities Act of 1933 and the Investment Company Act of 1940, respectively. This consent does not constitute a consent under section 7 of the Securities Act of 1933, and in consenting to the use of our name and the references to our Firm under such caption 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 said 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
October 30, 1998
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Exhibit 15(a)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Sansom Street Money Shares)
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 l2b-1 under the Act with respect to shares of its Class I Common Stock, par value $.001 per share (the "Class I 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 Planco Financial Services, Inc. (the "Distributor") as distributor of the Class I Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for the Class I Shares pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of the Class I 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 I Shares, compensation for distribution of the Class I Shares at the annual rate not to exceed .20% of the average daily net assets of the Class I 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 I Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class I Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of Class I Shares; printing of prospectuses and reports for other than existing shareholders; and preparation, printing and distribution of sales literature and advertising materials.
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 I 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. (a) This Plan shall continue in effect until August 16, 1989. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class I Shares at the first annual meeting of shareholders held after the effective date of the Fund's Registration Statement an Form N-lA under the Securities Act of 1933 and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class I Shares voted in favor of this Plan.
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 I 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 or 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 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.
Dated: August 16, 1988
Exhibit 15(b)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
or
THE RBB FUND, INC.
(Sansom Street Tax-Free Money Shares)
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 l2b-1 under the Act with respect to shares of its Class J Common Stock, par value $.001 per share (the Class J Shares"), and the Board of Directors has determined that there in a reasonable likelihood that adoption of this Plan of Distribution will benefit the Fund and its stockholders; and
WHEREAS, the Fund intends to employ Planco Financial Services, Inc. (the "Distributor") as distributor of the Class J Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for the Class J Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of the Class J 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 J Shares. compensation for distribution of the Class J Shares at the annual rate not to exceed .20% of the average daily not assets of the Class J 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 J Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class J Shares, including, but not limited to: compensation to and expenses, including overhead and telephone
expenses, of employees of the Distributor who engage in or support distribution of Class J Shares; printing of prospectus and reports for other than existing shareholders; and preparation, printing and distribution of sales literature and advertising materials.
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 J 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. (a) This Plan shall continue in effect until August 16, 1989. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class J Shares at the first annual meeting of shareholders held after the effective date of the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class J Shares have voted in favor of this Plan.
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-l Directors, or by a vote of a majority of the outstanding Class J Shares.
8. This Plan may not be amended to increase materially the amount of compensation provided for in paragraph I
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 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.
Dated: August 16, 1988
Exhibit 15(c)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Sansom Street Government Shares)
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 K Common Stock, par value $.001 per share (the "Class K 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 Planco Financial Services, Inc. (the "Distributor") an distributor of the Class K Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for the Class K Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of the Class K 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 l2b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the Class K Shares, compensation for distribution of the Class K Shares at the annual rate not to exceed .20% of the average daily net assets of the Class K 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 K Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class K Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of Class K Shares; printing of prospectuses and reports for other than existing shareholders; and preparation, printing and distribution of sales literature and advertising materials.
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 K 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 art 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-l Directors"), cast in person at a meeting (or meetings) called for the purpose of voting on this Plan and such related agreements.
5. (a) This Plan shall continue in effect until August 16, 1989. Thereafter. this Plan shall continue in affect for so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in paragraph 4.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class K Shares at the first annual meeting of shareholders held after the effective date of the Fund's Registration Statement an Form N-lA under the Securities Act of 1933 and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class K Shares have voted in favor of this Plan.
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 K 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 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.
Dated: August 16, 1988
Exhibit 15(d)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Cash Preservation Money Shares)
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 G Common Stock, par value $.001 per share (the "Class G 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 Planco Financial Services, Inc. (the "Distributor") as distributor of the Class G Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class G Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class G 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 G Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class G 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 G Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class G Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class G Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and
distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class G Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class G Shares, 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 broker/dealers who sell Class G Shares.
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 G 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. (a) This Plan shall continue in effect until August 16, 1989. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class G Shares at the first annual meeting of shareholders held after the effective date of the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class G Shares have voted in favor of this Plan.
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 G 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 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.
Dated: August 26, 1988
Exhibit (15)(e)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Cash Preservation Tax-Free Money Shares)
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 H Common Stock, par value $.001 per share (the "Class H 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 Planco Financial Services, Inc. (the "Distributor") as distributor of the Class H Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class H Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class H 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 H Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class H 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 H Shares. Such
amount may be spent by the Distributor on any activities or expenses primarily
intended to result in the sale of Class H Shares, including, but not limited to:
compensation to and expenses, including overhead and telephone expenses, of
employees of the Distributor who engage in or support distribution of the Class
H Shares; printing of prospectuses and reports for other than existing
shareholders; preparation, printing and distribution of sales literature and
advertising materials; and compensation to broker/dealers who sell Class H
Shares. The Distributor may negotiate with any such broker/dealer the services
to be provided by the broker/dealer to shareholders in connection with the sale
of Class H Shares, and all or any portion of the compensation paid to the
Distributor under paragraph 1 of this Plan may be re-allocated by the
Distributor to broker/dealers who sell Class H Shares.
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 H 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. (a) This Plan shall continue in effect until August 16, 1989. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class H Shares at the first annual meeting of shareholders held after the effective date of the Fund's Registration Statement on Form N-lA under the Securities Act of 1933 and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class H Shares have voted in favor of this Plan.
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 H 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 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 came may be, the first two years in an easily accessible place.
Dated: August 16, 1988
Exhibit 15(f)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Bedford Money Shares)
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 L Common Stock, par value $.001 per share (the "Class L 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 Planco Financial Services, Inc. (the 'Distributor") as distributor of the Class L Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class L Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class L 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 L Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class L 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 L Shares, Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class L Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class L Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and
distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class L Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class L Shares, 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 broker/dealers who sell Class L Shares.
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 L Shares.
4. In addition to the approval required by paragraph 3 above, this Plan shall not take affect 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. (a) This Plan shall continue in effect until August 16, 1989. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class L Shares at the first annual meeting of shareholders held after the effective data of the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class L Shares have voted in favor of this Plan.
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 expanded 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 L 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 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.
Dated: August 16, 1988
Exhibit (15) (g)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Bedford Tax-Free Money Shares)
WHEREAS. The RBB Fund, Inc. (the "Fund") intends to engage in business as an open-end management investment company and is registered an 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 M Common Stock, par value $.001 per share (the "Class M 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 Planco Financial Services, Inc. (the "Distributor") as distributor of the Class M Shares; and
WHEREAS. the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class M Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class M 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 an the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the Class M Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class M 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 an distributor of the Class M Shares. Such
amount may be spent by the Distributor on any activities or expenses primarily
intended to result in the sale of Class M Shares, including, but not limited to:
compensation to and expenses, including overhead and telephone expenses, of
employees of the Distributor who engage in or support distribution of the Class
M Shares; printing of prospectuses and reports for other than existing
shareholders; preparation, printing and distribution of sales literature and
advertising materials; and compensation to broker/dealers who sell Class M
Shares. The Distributor may negotiate with any such broker/dealer the services
to be provided by the broker/dealer to shareholders in connection with the sale
of class M Shares, and all or any portion of the compensation paid to the
Distributor under paragraph 1 of this Plan may be re-allocated by the
Distributor to broker/dealers who sell Class M Shares.
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 M 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. (a) This Plan shall continue in effect until August 16, 1989. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class M Shares at the first annual meeting of shareholders held after the effective date of the Fund's Registration Statement on Form N-lA under the Securities Act of 1933 and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class M Shares have voted in favor of this Plan.
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 M 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 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.
Dated: August 16, 1988
Exhibit 15(h)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Bedford Government Shares)
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 N Common Stock, par value $.001 per share (the "Class N 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 Planco Financial Services, Inc. (the "Distributor") as distributor of the Class N Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class N Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class N 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-l under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the Class N Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class N 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 an 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 N Shares. Such
amount may be spent by the Distributor on any activities or expenses primarily
intended to result in the sale of Class N Shares. including, but not limited to:
compensation to and expenses, including overhead and telephone expenses, of
employees of the Distributor who engage in or support distribution of the Class
N Shares; printing of prospectuses and reports for other than existing
shareholders; preparation, printing and distribution of sales literature and
advertising materials; and compensation to broker/dealers who sell class N
Shares. The Distributor may negotiate with any such broker/dealer the services
to be provided by the broker/dealer to shareholders in connection with the sale
Of Class N Shares, 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 broker/dealers who sell Class N Shares.
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 N 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. (a) This Plan shall continue in effect until August 16, 1989. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class N Shares at the first annual meeting of shareholders hold after the effective date of the Fund's Registration Statement an Form N-1A under the Securities Act of 1933 and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class N Shares have voted in favor of this Plan.
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 N 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 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.
Dated: August 16, 1988
Exhibit 15(k)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Alpha Money Shares)
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 Alpha 1 Common Stock, par value $.001 per share (the "Class Alpha 1 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Alpha 1 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Alpha 1 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Alpha 1 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 Alpha 1 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Alpha 1 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 Alpha 1 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Alpha 1 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Alpha 1 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Alpha 1 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Alpha 1 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Alpha 1 Shares.
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 Alpha 1 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Alpha 1 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Alpha 1 Shares have voted in favor of this Plan.
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 expanded 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 Alpha 1 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 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.
Dated: November 5, 1991
Exhibit 15(j)
AMENDMENT NO. 1
TO
PLANS OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Classes A through Q)
WHEREAS, The RBB Fund, Inc. (the "Fund") is 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 has adopted a separate Plan of Distribution pursuant to Rule 12b-1 under the Act (each, a "Plan") with respect to shares (the "Shares") of each class of its Common Stock, par value $.001 per share (Classes A through Q) (collectively, the "Classes"); and
WHEREAS, each Plan currently states that the Fund's distributor is Planco Financial Services, Inc. ("Planco"); and
WHEREAS, the Fund intends to replace Planco with Counsellors Securities Inc. ("Counsellors") as distributor of the Shares; and
WHEREAS, the Fund and Counsellors intend to enter into a Distribution Agreement and Distribution Agreement Supplements which relate to the Classes, pursuant to which the Fund will employ Counsellors as distributor for the continuous offering of the Shares; and
WHEREAS, the Board of Directors desires to amend each Plan so that each Plan refers to Counsellors as the Fund's distributor.
NOW THEREFORE, in accordance with each Plan and Rule 12b-1 under the Act, each Plan is hereby amended so that all references in such Plan to "Planco Financial Services, Inc" or the "Distributor" are hereby deemed to be to Counsellors.
The foregoing amendment has been approved by a vote of both a majority of the Board of Directors of the Fund and a majority of the directors of the Fund who are not interested persons (as defined in the Act) of the Fund and have no direct or indirect financial interest in the operation of each Plan or any agreements related to it.
The foregoing amendment is effective April 10, 1991.
Exhibit 15(l)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Alpha Tax-Free Money Shares)
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 Alpha 2 Common Stock, par value $.001 per share (the "Class Alpha 2 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Alpha 2 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Alpha 2 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Alpha 2 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 Alpha 2 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Alpha 2 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 Alpha 2 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Alpha 2 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Alpha 2 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Alpha 2 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Alpha 2 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Alpha 2 Shares.
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 Alpha 2 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Alpha 2 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Alpha 2 Shares have voted in favor of this Plan.
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 l2b-1 Directors, or by a vote of a majority of the outstanding Class Alpha 2 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 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.
Dated: November 5, 1991
Exhibit 15(m)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Alpha Government Shares)
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-l under the Act with respect to shares of its Class Alpha 3 Common Stock, par value $.001 per share (the "Class Alpha 3 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Alpha 3 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Alpha 3 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Alpha 3 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 Alpha 3 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Alpha 3 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 Alpha 3 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Alpha 3 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Alpha 3 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Alpha 3 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Alpha 3 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Alpha 3 Shares.
3. This Plan shall not take affect until it has been approved by a vote of at least a majority (as defined in the Act) of the outstanding Class Alpha 3 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Alpha 3 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Alpha 3 Shares have voted in favor of this Plan.
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 expanded 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 Alpha 3 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 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.
Dated: November 5, 1991
Exhibit 15(n)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-I
OF
THE RRB FUND, INC.
(Alpha New York Municipal Money Shares)
WHEREAS, The RBB Fund, Inc. (the "Fund") intends to engage in business as an open-end management investment company and is registered an 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 Alpha 4 Common Stock, par value $.001 per share (the "Class Alpha 4 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Alpha 4 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Alpha 4 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Alpha 4 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 Alpha 4 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Alpha 4 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 Alpha 4 Shares. Such amount may be spent by the Distributor an any activities or expenses primarily intended to result in the sale of Class Alpha 4 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Alpha 4 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Alpha 4 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Alpha 4 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Alpha 4 Shares.
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 Alpha 4 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Alpha 4 Shares at the first special meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in affect beyond the date of such special meeting unless a majority of the outstanding Class Alpha 4 Shares have voted in favor of this Plan.
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 Alpha 4 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 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.
Dated: November 5, 1991
Exhibit 15(o)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Beta Tax-Free Money Shares)
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 Beta 2 Common Stock, par value $.001 per share (the "Class Beta 2 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Beta 2 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Beta 2 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Beta 2 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 l2b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the Class Beta 2 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Beta 2 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 Beta 2 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Beta 2 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Beta 2 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Beta 2 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Beta 2 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Beta 2 Shares.
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 Beta 2 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Beta 2 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Beta 2 Shares have voted in favor of this Plan.
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 Beta 2 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 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.
Dated:
November 5, 1991
Exhibit 15(p)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Beta Government Shares)
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 Beta 3 Common Stock, par value $.001 per share (the "Class Beta 3 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Beta 3 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Beta 3 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Beta 3 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 Beta 3 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Beta 3 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 Beta 3 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Beta 3 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Beta 3 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Beta 3 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Beta 3 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Beta 3 Shares.
3. This Plan shall not take affect until it has been approved by a vote of at least a majority (as defined in the Act) of the outstanding Class Beta 3 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Beta 3 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-lA under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Beta 3 Shares have voted in favor of this Plan.
6. The Distributor shall provide to the Board or Directors of the Fund and the Board or 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 Beta 3 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 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.
Dated: November 5, 1991
Exhibit 15(q)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Beta New York Municipal Money Shares)
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 Beta 4 Common Stock, par value $.001 per share (the "Class Beta 4 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Beta 4 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Beta 4 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Beta 4 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 Beta 4 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Beta 4 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 Beta 4 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Beta 4 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Beta 4 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Beta 4 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Beta 4 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Beta 4 Shares.
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 Beta 4 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Beta 4 Shares at the first special meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such special meeting unless a majority of the outstanding Class Beta 4 Shares have voted in favor of this Plan.
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 Beta 4 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 affect, 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 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.
Dated: November 5, 1991
Exhibit 15(r)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Gamma Tax-Free Money Shares)
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 Gamma 2 Common Stock, par value $.001 per share (the "Class Gamma 2 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Gamma 2 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Gamma 2 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Gamma 2 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 Gamma 2 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Gamma 2 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 Gamma 2 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Gamma 2 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Gamma 2 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Gamma 2 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Gamma 2 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Gamma 2 Shares.
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 Gamma 2 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Gamma 2 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-lA under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in affect beyond the date of such annual meeting unless a majority of the outstanding Class Gamma 2 Shares have voted in favor of this Plan.
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 Gamma 2 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 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.
Dated: November 5, 1991
Exhibit 15(s)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Gamma Government Shares)
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 Gamma 3 Common Stock, par value $.001 per share (the "Class Gamma 3 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Gamma 3 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Gamma 3 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Gamma 3 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 Gamma 3 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Gamma 3 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 Gamma 3 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Gamma 3 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Gamma 3 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Gamma 3 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Gamma 3 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Gamma 3 Shares.
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 Gamma 3 Shares.
4. In addition to the approval required by paragraph 3
(above), this Plan shall not take affect 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. (a) This Plan shall continue in affect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Gamma 3 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Gamma 3 Shares have voted in favor of this Plan.
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 Gamma 3 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 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.
Dated: November 5, 1991
Exhibit 15(t)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Gamma New York Municipal Money Shares)
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 Gamma 4 Common Stock, par value $.001 per share (the "Class Gamma 4 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Gamma 4 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Gamma 4 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Gamma 4 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 Gamma 4 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Gamma 4 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 Gamma 4 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Gamma 4 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Gamma 4 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Gamma 4 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Gamma 4 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Gamma 4 Shares.
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 Gamma 4 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Gamma 4 Shares at the first special meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such special meeting unless a majority of the outstanding Class Gamma 4 Shares have voted in favor of this Plan.
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 Gamma 4 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 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.
Dated: November 5, 1991
Exhibit 15(u)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Delta Money Shares)
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 Delta 1 Common Stock, par value $.001 per share (the "Class Delta 1 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Delta 1 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Delta 1 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Delta 1 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 Delta 1 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Delta 1 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 Delta 1 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Delta 1 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Delta 1 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Delta 1 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Delta 1 Shares, 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 broker/dealers who sell Class Delta 1 Shares.
3. This Plan shall not take affect until it has been approved by a vote of at least a majority (as defined in the Act) of the outstanding Class Delta 1 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Delta 1 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Delta 1 Shares have voted in favor of this Plan.
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 majority of the outstanding Class Delta 1 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 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.
Dated: November 5, 1991
Exhibit 15(v)
PLAN OF DISTRIBUTION PURSUANT TO Rule 12b-1
OF
THE RBB FUND, INC.
(Delta Tax-Free Money Shares)
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 Delta 2 Common Stock, par value $.001 per share (the "Class Delta 2 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Delta 2 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Delta 2 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Delta 2 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 Delta 2 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Delta 2 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 Delta 2 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Delta 2 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses of employees of the Distributor who engage in or support distribution of the Class Delta 2 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Delta 2 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Delta 2 shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Delta 2 shares.
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 Delta 2 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) the approval and continuance of this Plan shall also be submitted to the holders of Class Delta 2 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Delta 2 Shares have voted in favor of this Plan.
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 Delta 2 Shares.
a. 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 affect, 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 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.
Dated: November 5, 1991
Exhibit 15(w)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Delta Government Shares)
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 Delta 3 Common Stock, par value $.001 per share (the "Class Delta 3 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Delta 3 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Delta 3 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Delta 3 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 Delta 3 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Delta 3 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 Delta 3 Shares. Such amount may be spent by the Distributor an any activities or expenses primarily intended to result in the sale of Class Delta 3 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Delta 3 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Delta 3 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of class Delta 3 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Delta 3 Shares.
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 Delta 3 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Delta 3 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Delta 3 Shares have voted in favor of this Plan.
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 Delta 3 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 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.
Dated: November 5, 1991
Exhibit 15(x)
PLAN OF DISTRIBUTION PURSUANT TO Rule 12b-1
OF
THE RBB FUND, INC.
(Delta New York Municipal Money Shares)
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 Delta 4 Common Stock, par value $.001 per share (the "Class Delta 4 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Delta 4 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Delta 4 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Delta 4 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 Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the Class Delta 4 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Delta 4 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 Delta 4 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Delta 4 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Delta 4 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Delta 4 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of class Delta 4 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Delta 4 Shares.
3. This Plan shall not take affect until it has been approved by a vote of at least a majority (as defined in the Act) of the outstanding Class Delta 4 Shares.
4. In addition to the approval required by paragraph 3
(above), this Plan shall not take affect 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Delta 4 Shares at the first special meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such special meeting unless a majority of the outstanding Class Delta 4 Shares have voted in favor of this Plan.
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 Delta 4 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 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.
Dated: November 5, 1991
Exhibit 15(y)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Epsilon Money Shares)
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 Epsilon 1 Common Stock, par value $.001 per share (the "Class Epsilon 1 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Epsilon 1 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Epsilon 1 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Epsilon 1 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 Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the Class Epsilon 1 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Epsilon 1 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 Epsilon 1 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Epsilon 1 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Epsilon 1 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Epsilon 1 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Epsilon 1 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Epsilon 1 Shares.
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 Epsilon 1 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Epsilon 1 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-lA under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Epsilon 1 Shares have voted in favor of this Plan.
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 Epsilon 1 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 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.
Dated: November 5, 1991
Exhibit 15(z)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Epsilon Tax-Free Money Shares)
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 Epsilon 2 Common Stock, par value $.001 per share (the "Class Epsilon 2 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Epsilon 2 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Epsilon 2 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Epsilon 2 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 Epsilon 2 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Epsilon 2 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 Epsilon 2 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Epsilon 2 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Epsilon 2 Shares; printing of prospectuses and reports for other than existing shareholders; printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Epsilon 2 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Epsilon 2 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Epsilon 2 Shares.
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 Epsilon 2 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Epsilon 2 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No.33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Epsilon 2 Shares have voted in favor of this Plan.
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 Epsilon 2 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 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.
Dated: November 5, 1991
Exhibit 15(aa)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Epsilon Government Shares)
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 Epsilon 3 Common Stock, par value $.001 per share (the "Class Epsilon 3 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Epsilon 3 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Epsilon 3 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Epsilon 3 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 Epsilon 3 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Epsilon 3 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 Epsilon 3 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Epsilon 3 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Epsilon 3 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Epsilon 3 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Epsilon 3 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Epsilon 3 Shares.
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 Epsilon 3 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Epsilon 3 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Epsilon 3 Shares have voted in favor of this Plan.
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 Epsilon 3 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 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.
Dated: November 5, 1991
Exhibit 15(bb)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Epsilon New York Municipal Money Shares)
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 Epsilon 4 Common Stock, par value $.001 per share (the "Class Epsilon 4 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Epsilon 4 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Epsilon 4 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Epsilon 4 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 Epsilon 4 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Epsilon 4 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 Epsilon 4 Shares. such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Epsilon 4 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Epsilon 4 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Epsilon 4 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Epsilon 4 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Epsilon 4 Shares.
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 Epsilon 4 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. (a) This Plan shall continue in affect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Epsilon 4 Shares at the first special meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such special meeting unless a majority of the outstanding Class Epsilon 4 Shares have voted in favor of this Plan.
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 Epsilon 4 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 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.
Dated: November 5, 1991
Exhibit 15(cc)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Zeta Money Shares)
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 Zeta 1 Common Stock, par value $.001 per share (the "Class Zeta 1 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Zeta 1 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Zeta 1 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Zeta 1 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 Zeta 1 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Zeta 1 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 I of this Plan shall be paid for the Distributor's services as distributor of the Class Zeta 1 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Zeta 1 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Zeta 1 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Zeta 1 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Zeta I Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Zeta 1 Shares.
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 Zeta 1 Shares.
4. In addition to the approval required by paragraph 3
(above), this Plan shall not take affect 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Zeta 1 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-lA under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Zeta 1 Shares have voted in favor of this Plan.
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 Zeta 1 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 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.
Dated: November 5, 1991
Exhibit 15(dd)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Zeta Tax-Free Money Shares)
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 Zeta 2 Common Stock, par value $.001 per share (the "Class Zeta 2 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Zeta 2 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Zeta 2 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Zeta 2 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 Zeta 2 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Zeta 2 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 Zeta 2 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Zeta 2 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Zeta 2 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Zeta 2 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Zeta 2 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Zeta 2 Shares.
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 Zeta 2 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Zeta 2 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-lA under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Zeta 2 Shares have voted in favor of this Plan.
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 Zeta 2 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 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.
Dated: November 5, 1991
Exhibit 15(ee)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Zeta Government Shares)
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 Zeta 3 Common Stock, par value $.001 per share (the "Class Zeta 3 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Zeta 3 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Zeta 3 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Zeta 3 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 Zeta 3 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Zeta 3 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 Zeta 3 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Zeta 3 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Zeta 3 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Zeta 3 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Zeta 3 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Zeta 3 Shares.
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 Zeta 3 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Zeta 3 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Zeta 3 Shares have voted in favor of this Plan.
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 Zeta 3 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 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.
Dated:
November 5, 1991
Exhibit 15(ff)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Zeta New York Municipal Money Shares)
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 Zeta 4 Common Stock, par value $.001 per share (the "Class Zeta 4 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Zeta 4 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Zeta 4 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Zeta 4 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 Zeta 4 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Zeta 4 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 Zeta 4 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Zeta 4 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Zeta 4 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Zeta 4 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Zeta 4 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Zeta 4 Shares.
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 Zeta 4 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Zeta 4 Shares at the first special meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such special meeting unless a majority of the outstanding Class Zeta 4 Shares have voted in favor of this Plan.
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 Zeta 4 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 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.
Dated: November 5, 1991
Exhibit 15(gg)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Eta Money Shares)
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 Eta I Common Stock, par value $.001 per share (the "Class Eta 1 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Eta 1 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Eta 1 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Eta 1 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 Eta I Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Eta I 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 Eta 1 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Eta 1 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Eta 1 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Eta I Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Eta I Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Eta 1 Shares.
3. This Plan shall not take affect until it has been approved by a vote of at least a majority (as defined in the Act) of the outstanding Class Eta 1 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. (a) This Plan shall continue in effect until August 16,
1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Eta 1 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Eta 1 Shares have voted in favor of this Plan.
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 Eta I 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 affect, 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 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.
Dated: November 5, 1991
Exhibit 15(hh)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Eta Tax-Free Money Shares)
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 Eta 2 Common Stock, par value $.001 per share (the "Class Eta 2 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Eta 2 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Eta 2 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Eta 2 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 Eta 2 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Eta 2 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 Eta 2 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Eta 2 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Eta 2 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Eta 2 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Eta 2 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Eta 2 Shares.
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 Eta 2 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Eta 2 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Eta 2 Shares have voted in favor of this Plan.
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 Eta 2 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 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.
Dated: November 5, 1991
Exhibit 15(ii)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Eta Government Shares)
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 Eta 3 Common Stock, par value $.001 per share (the "Class Eta 3 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Eta 3 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Eta 3 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Eta 3 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 Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the Class Eta 3 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Eta 3 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 Eta 3 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Eta 3 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Eta 3 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Eta 3 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Eta 3 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Eta 3 Shares.
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 Eta 3 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Eta 3 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Eta 3 Shares have voted in favor of this Plan.
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 Eta 3 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 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.
Dated: November 5, 1991
Exhibit 15(jj)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Eta New York Municipal Money Shares)
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 l2b-1 under the Act with respect to shares of its Class Eta 4 Common Stock, par value $.001 per share (the "Class Eta 4 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Eta 4 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Eta 4 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Eta 4 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 Eta 4 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Eta 4 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 Eta 4 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Eta 4 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Eta 4 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Eta 4 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Eta 4 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Eta 4 Shares.
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 Eta 4 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Eta 4 Shares at the first special meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-lA under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such special meeting unless a majority of the outstanding Class Eta 4 Shares have voted in favor of this Plan.
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 Eta 4 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 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.
Dated: November 5, 1991
Exhibit 15(kk)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Theta Money Shares)
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 Theta 1 Common Stock, par value $.001 per share (the "Class Theta 1 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Theta 1 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Theta 1 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Theta 1 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 Theta 1 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Theta 1 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 Theta 1 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Theta 1 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Theta 1 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Theta 1 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale or Class Theta 1 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Theta 1 Shares.
3. This Plan shall not take affect until it has been approved by a vote of at least a majority (as defined in the Act) of the outstanding Class Theta 1 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Theta 1 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-lA under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Theta 1 Shares have voted in favor of this Plan.
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 Theta 1 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 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.
Dated: November 5, 1991
Exhibit 15(ll)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Theta Tax-Free Money Shares)
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 Theta 2 Common Stock, par value $.001 per share (the "Class Theta 2 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Theta 2 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Theta 2 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Theta 2 Shares;
NOW, THEREFORE, the Fund hereby adapts, 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 Theta 2 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Theta 2 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 Theta 2 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Theta 2 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Theta 2 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Theta 2 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of class Theta 2 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Theta 2 Shares.
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 Theta 2 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Theta 2 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Theta 2 Shares have voted in favor of this Plan.
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 Theta 2 Shares.
8. This Plan may not be amended to increase materially the amount of compensation provided for in paragraph I 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 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.
Dated: November 5, 1991
Exhibit 15(mm)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Theta Government Shares)
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 Theta 3 Common Stock, par value $.001 per share (the "Class Theta 3 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Theta 3 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Theta 3 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Theta 3 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 Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the Class Theta 3 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Theta 3 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 Theta 3 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Theta 3 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Theta 3 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Theta 3 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Theta 3 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Theta 3 Shares.
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 Theta 3 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Theta 3 Shares at the first annual meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such annual meeting unless a majority of the outstanding Class Theta 3 Shares have voted in favor of this Plan.
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 Theta 3 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 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.
Dated: November 5, 1991
Exhibit 15(nn)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(Theta New York Municipal Money Shares)
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 Theta 4 Common Stock, par value $.001 per share (the "Class Theta 4 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 Counsellors Securities Inc. (the "Distributor") as distributor of the Class Theta 4 Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate Distribution Agreement with the Fund for Class Theta 4 Shares, pursuant to which the Fund will employ the Distributor as distributor for the continuous offering of Class Theta 4 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 l2b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the Class Theta 4 Shares, compensation for distribution of its shares at the annual rate not to exceed .65% of the average daily net assets of the Class Theta 4 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 Theta 4 Shares. Such amount may be spent by the Distributor on any activities or expenses primarily intended to result in the sale of Class Theta 4 Shares, including, but not limited to: compensation to and expenses, including overhead and telephone expenses, of employees of the Distributor who engage in or support distribution of the Class Theta 4 Shares; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and compensation to broker/dealers who sell Class Theta 4 Shares. The Distributor may negotiate with any such broker/dealer the services to be provided by the broker/dealer to shareholders in connection with the sale of Class Theta 4 Shares, and all or any portion of the compensation paid to the Distributor under paragraph 1 of this Plan may be re-allocated by the Distributor to broker/dealers who sell Class Theta 4 Shares.
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 Theta 4 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. (a) This Plan shall continue in effect until August 16, 1992. 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.
(b) The approval and continuance of this Plan shall also be submitted to the holders of Class Theta 4 Shares at the first special meeting of shareholders held after the effective date of Post-Effective Amendment No. 6 to the Fund's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 33-20827) and under the Act. Notwithstanding anything contained in paragraph 5(a) to the contrary, this Plan shall not continue in effect beyond the date of such special meeting unless a majority of the outstanding Class Theta 4 Shares have voted in favor of this Plan.
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 Theta 4 Shares.
8. This Plan may not be amended to increase materially the amount of compensation provided for in paragraph I 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 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.
Dated: November 5, 1991